A Government review recommends the Canterbury Regional Council be replaced with commissioners and a new authority set up to deal with water rights.
The review was ordered last year after 10 Canterbury mayors complained about the regional council's processing of resource management applications and its management of natural resources.
The report says freshwater management is the biggest issue facing Canterbury but there are huge frustrations over delays and costs of getting resource consents approved.
The review group, headed by former National MP Wyatt Creech, says the gap between what needs to be done and the council's ability to act is enormous and unprecedented.
About 70% of New Zealand's fresh water is in Canterbury and the review says the scale and nature of competing demands from producers and environmentalistsis significantly greater than for any other regional council.
The review found the Canterbury council had processed only 29% of its resource consent applications within the statutory timeframes.
Mr Creech says the council has improved its performance recently, but it is not good enough, and Government intervention is "absolutely necessary".
The review recommends the establishment of a new regional authority to handle all water issues, and a temporary commission to replace the regional council.
The Government says it did not expect the review to find the problems would be so serious.
Although no final decisions have been made, Environment Minister Nick Smith says it is clear substantive change is required.
Regional council chair Alec Neill says the council will work with the Government and he will examine the criticisms in detail, but stressed the Government has not made any decisions yet on its future.
"Where there are criticisms, we will endeavour to remedy those. Where there are recommendations that will make us work in a better manner, we implement those recommendations."
Dr Smith and Local Government Minister Rodney Hide are to meet with the regional council and stakeholders on Wednesday.
Review a vindication - mayor
Canterbury mayors say it is vital the Government acts quickly to follow the review's recommendations.
Last year, the mayors wrote to Mr Hide to express concerns about the regional council's performance.
The chairman at the time, Sir Kerry Burke, a former Speaker of Parliament, was unseated in a vote of no-confidence and replaced by Alec Neill.
Bob Parker, the chair of the Canterbury mayoral forum, says the report is a vindication, as it shows the problems with the council are worse than many people thought.
Mr Parker, who is also the mayor of Christchurch, believes it is vital for the future of the province that the problems are dealt with quickly.
Ashburton mayor Bede O'Malley says frustrations with the regional council go back a long way and is pleased that has been acknowledged in the report.
Hurunui District mayor Garry Jackson believes creating a new authority to deal with water-related issues in Canterbury would streamline the consent process.
The report says the regional council has a history of setting timeframes for planning and not meeting them, citing plans to allocate water from the Waipara River which have been delayed since 2004.
Mr Jackson says a new authority would handle those sorts of applications more efficiently.