The Agia Zoni II ship, which was 45 years old, sank near the island of Salamis on Sunday night.
By Wednesday, the spill had spread for miles towards stretches of the Athens Riviera, leaving beaches deserted and authorities frantically trying to deal with the problem.
The wreck was 'sealed' by Tuesday, according to the coastguard, so it is hoped that not all of the 2,500 tons of oil onboard has seeped into the sea.
Residents are calling the event a 'catastrophe'.
Fotis Yiamanis, who lives in the seafront neighbourhood of Faliro, said: 'Even if the oil leaves the surface of the water, the rest is going to sink and set in the sand. We'll step in and (our feet) will turn black.'
Yannis Trikaminas, who lives in Piraeus, said: 'You can't go near now.
'It stinks of oil, who's going to go in there to swim? Look at the boats there, they are black from the tar.'
Privately owned tank trucks are working to clean up the pollution, assisted by floating cranes and offshore anti-pollution vessels, authorities have said.