An exhaust pipe cooling system regulates the temperature of a exhaust system catalyzer on a small watercraft to ensure proper functioning and to inhibit overheating of the catalyzer. The cooling system supplies fresh water to a water jacket which surrounds the catalyzer in a manner independent of an engine cooling system. The cooling system also supplies fresh water to an upwardly oriented discharge nozzle. The upward water jet from the nozzle spays well above the surface of the body of water in which the watercraft is operated to provide a visible indicator of location of the small watercraft. A control valve regulate the flow rate of water through the cooling system to adjust the temperature of the catalyzer to fall within a desired range of operating temperatures. Under normal conditions, at least a majority of the water flows through the discharge nozzle; however, if the temperature of the catalyzer rises to an undesirably level, the control valve routes at least an increased portion of the water to the water jacket surrounding the catalyzer.