About 150 residents in the Dalethorpe area east of Christchurch are being asked to boil water after part of the Malvern Hills Rural Water Scheme was contaminated with e-coli.
The Selwyn District Council has begun chlorinating water, but says bacteria may have spread to private water tanks.
The e-coli is due to run-off from sheep farms.
A spokesperson for the council says this is normally neutralised by ultra-violet water treatment, but this method is less effective when there has been heavy rainfall.
