The Horsley Creek catchment is located on the southern side of Lake Illawarra and mainly includes the suburb of Albion Park Rail and part of Oak Flats. The catchment has a combined area of 9.25km², draining from the quarries in the south of the catchment into Koona Bay and Lake Illawarra at Horsley Inlet. The Horsley Creek catchment is almost entirely cleared of forest. The northern half of the catchment is largely covered by residential and light industrial development. The southern half of the catchment contains two large hard rock quarry operations. The buffer areas surrounding the quarries are currently used for cattle and horse grazing.

The catchment has a multi-branched drainage pattern, significantly impacted by man-made drainage systems associated with transport corridors that cross the catchment in an east-west direction, including the South Coast railway, Princes Highway, the East West Link Road and Lakes Entrance Road. Flooding in this catchment area is unfavourably affected at many locations by bridges, culverts and intrusions of development onto floodplains. Flooding in the lower reaches of Horsley Creek is also affected by flooding in Lake Illawarra and sand build-up in the outfall reach into Lake Illawarra.