The horse was discovered in a tributary of the River Swilly close to Letterkenny Town Council offices.
Animal welfare officers have been made aware of the find.
The animal was face down in the water but did not appear to have been there long.
It is still not known how the horse died.
A woman who came across the horse told Donegaldaily she was left “sickened” by the discovery.
“It’s bad enough to see a dead bird or a dead cat on a road but to see a horse face-down in a river in the middle of the own was awful.
“I don’t know what happened to it but I wasn’t well after seeing it. It appeared to have some kind of cover on it so it was being looked after by somebody,” she said.