Irwindale has asked a judge to prevent Huy Fong Foods from making the spicy condiment until the factory submits plan to reduce the smell.
Huy Fong representatives have said they are actively trying to fix the problem and have received no citations.
Sriracha sauce is sold around the world, and there was even a recent Sriracha festival in LA.
Irwindale officials say residents have complained of burning eyes, irritated throats and headaches and are unable to escape the smell even inside their homes.
“The odors are so strong and offensive as to have caused residents to move outdoor activities indoors and even to vacate their residences temporarily to seek relief from the odors,” the city alleges in the lawsuit.
Huy Fong moved its factory to Irwindale, 20 miles outside Los Angeles, earlier this year. Before, it had two smaller factories in a nearby town.
During the months of September to December, all the chillies needed for producing the year’s sauce are processed and stored.
The company had been co-operating with the city until representatives denied the odors were a problem, saying workers had no complaints, according to Irwindale City Attorney Fred Galante.
Huy Fong founder David Tran told the Los Angeles Times that the company had already installed filters in the factory, to combat escaping smells, but needed more time to research how to best abate the odor.
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