Video footage from the demonstration showed protesters advancing toward a construction area in clouds of tear gas, as police vehicles burned and people hurled projectiles.
Police reportedly detonated more than 4,000 non-lethal dispersion grenades to fend off protesters, some of whom were armed with machetes, axes and gasoline bombs, the Associated Press reported.
France's interior minister, Gerald Darmanin, reported more than 30 people injured in the violent protest, including a police officer and a protester who were both critically injured and transported by helicopter for hospital treatment, the AP reported.
Additionally, 23 police officers and six demonstrators suffered minor injuries, Darmanin said, according to the AP.
Protest organizers, however, reported approximately 200 injured demonstrators, with about 40 suffering deep cuts caused by police projectiles, the AP reported.
The demonstration, organized by the collective Bassines Non Merci, was held in defiance of a ban on gatherings in the Sainte-Soline district.
Darmanin said the government had deployed more than 3,000 police for the demonstration, Reuters reported.
Discussions over water resources have intensified in France, which last year experienced its worst drought on record.
Opponents of the giant artificial reservoir project argue that it is unsustainable and does not support the local community, while supporters say its a way to use water efficiently when needed, especially during times of drought.
A similar protest last October also resulted in injuries.
Saturday's protest comes after weeks of at-times violent demonstrations in France against divisive pension reforms that were adopted without a final parliamentary vote.