Mills, who alongside Saskia Clark is aiming to improve on their silver medal at London 2012 in the 470 class, says plastic bags can get caught on a boat's fin and severely affect speed.
"If that happens at the start line you can slow to half-speed and everyone will sail past you," she said.
The sailing gets under way on 8 August.
Organisers have spent months clearing the Bay, which receives 70% of Rio's sewage. Sailors have also reported seeing furniture and floating animal carcasses.
But rubbish is still being pulled out of the water with plastic bags most likely to affect windsurfers, which are the lightest craft at the Games.
"Picking up a bag at the wrong time could be disastrous," Mills told BBC Sport.
However, she added: "Having said that, it is very rare. We've been caught once in 150 days.
"We really hope it doesn't affect anyone and it's just clean sailing out there."
Team GB medal hope Bryony Shaw, who won a windsurfing bronze at the 2008 Olympics, told BBC Sport: "The water quality is an issue and you do pick up rubbish on your fins. Nobody wants medals taken away for that reason.
"But in the last couple of weeks the Bay is cleaning up - even when you pass the tideline there is way less rubbish to weave your way through.
"On a windsurfer we are going pretty fast, rubbish can stop you in your tracks and nobody wants that in the races."
Great Britain's sailing sailing team leader B team leader Stephen Park added: "There is still a long way to go but I don't think we can underestimate the size of the challenge they are facing.
"Hopefully over the next few days we will see it continue to improve and there are one or two individuals doing great work clearing up rubbish particularly around the tidelines."
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Great Britain sailor Hannah Mills says it would be "disastrous" if the rubbish in Rio's Guanabara Bay affected the team's Olympic medal chances.