Sungai Ayer Itam is one of the main river on the eastern side of Penang Island. It begins as a small stream at the foothills of Penang Hill behind the Kek Lok Si Temple. At Kampung Melayu it converges with its first tributary, Sungai Air Putih, which starts behind Hye Keat Estate. Sungai Ayer Itam, which means "black water river" gets its name from its murky waters while Sungai Air Putih ("white water river") was named after its clear water.
One of the main tributaries of Sungai Ayer Itam is Sungai Dondang. This is the river that flows thorough the Farlim area of Air Itam. Sungai Dondang flows into Sungai Ayer Itam behind the Little Sisters of the Poor. From there, Sungai Ayer Itam continues its eastward meander passing under Batu Lanchang Lane, after which it heads north.