The photograph was taken by Ben Hardaker, who got in touch with the Skegness Standard so families are aware.
"In view of the coming bank holiday and with the danger particularly to children who might pick them up, I thought that a warning to people might be in order," he said.
"I have noticed hundreds of Brown-tail Moth caterpillars on Skegness beach over the last two days.
"The little critters (about 2.5cm or 1 inch long) cause intense irritation if they get on your skin due to the shedding of the hundreds of fine hairs on them.
"The hairs have tiny barbs and get stuck in the skin causing and alarming rash and resulting in constant itching."
According to the Butterfly Conservation website, Brown-tail Moth populations explode occasionally, and have been doing so for hundreds of years.
The first recorded outbreak was in 1720, near Kew outside London. Around 1900 the moth was so rare that some people thought it might disappear.
These days outbreaks seem to be getting more frequent and the moth is spreading inland and northwards.
Since 2019 thy caterpillars have been seen in huge numbers across the countryside, in much of southern England and East Anglia.
Advice for anyone who sees them is not to panic. The website says: "Leave them alone, don’t touch and try to stay away from areas where there are lots of them.
"The caterpillars are a problem in May and early June, much less so at other times. If they are in the house or on the garden furniture, put on vinyl gloves, pick them up and drop them in a bucket of soapy and salty water.
"If you get the rash, which is often on the hands, arms and neck, apply antihistamine cream or calamine lotion. Symptoms should subside after a few hours, but seek medical help if you are unsure, or the reaction doesn’t lessen."