The expensive camera was placed inside a black bag beside a notorious illegal fly-tipping site. The disguise was so good that workers for Chichester District Council, West Sussex, cleared the camera believing it was genuine rubbish.
"Because the camera had been hidden in something that looked like rubbish, they cleared that away as well," said John Cherry, the deputy council leader.
"The workers didn't need to know the details of this sort of operation so they were just sent along to pick up the rubbish."
The council did not disclose how much the camera cost, but similar systems involving a minature video camera cost between £7,000 and £10,000.
A spokesman for Privacy International, the human rights group formed as a watchdog on surveillance and invasions of privacy, said: "It would be hilarious if it wasn't so sad. It just goes to show why local authorities require greater scrutiny and accountability."
The council would not say whether recordings had been lost or where the site is located.
A council spokesman said: "We are required to consider whether the public interest in disclosing the information outweighs the exemption. But we consider that as there are on-going difficulties with this site, the investigation should take precedence."
