The number of households in Wales recycling is now almost nine in ten, according to a government report.
But the number of incidents of fly tipping has increased, according to the Living in Wales survey measuring progress against the Assembly Government's Environment Strategy Action Plan.
The report shows the percentage of households recycling paper, glass, plastic or cans has risen from 72.8% in 2005 to 87.3% in 2007 - an increase of 14.5% over two years.
Meanwhile, the proportion of municipal waste recycled or composted has increased from 25.5% in 2005-2006 to 29.9% in 2006-2007.
But incidents of fly tipping were up from around 55,000 in 2006-2007 to 61,000 in 2007-2008 and cost local authorities and the Environment Agency Wales more than £3.1m to clear up.
Jane Davidson, minister for environment, sustainability and housing, said: "This report clearly shows that improvements are being made in priority areas of Welsh Assembly Government policy and delivery.
"But this report is also a reminder to us all that there is a lot more to do to improve our environment."
The Assembly Government says the increase in fly-tipping is partly due to better reporting of incidents rather than an actual increase.
But Ms Davidson pledged a crack down on fly-tipping.
"We are committed to dealing with improving local environmental quality and tackling waste crime such as fly-tipping," she said.
She says the Assembly Government and the Department for Food and Rural Affairs are consulting on stronger powers to tackle the problem.
The powers from the Clean Neighbourhoods and Environment Act 2005 will allow authorities to stop, search and seize a vehicle suspected of being involved in fly-tipping.
A new Environment Strategy Action Plan is due to be published in early autumn and is intended to tackle unimproved areas, such as fly tipping.
The report also found that almost 100% of rivers had good or fair chemical and biological quality.
And it revealed that more Welsh children are walking to school - in 2005-2006 38.8% walked as their main mode of travel compared 36.1% in 2002-2003.
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