The Far North District Council warns Kaitaia may run out of clean drinking water within the next two weeks due to the drought.
The council previously asked residents to voluntarily reduce water consumption by 20% but says the situation has become critical and residents must cut back on their use.
Though some people have been making an effort to conserve water, most are not taking the matter seriously enough, it says.
The council will carry out periodic checks on metered connections to ensure that the new guidelines are being adhered to and disciplinary action will be taken if necessary.
The Northland operations manager for Farmers of New Zealand, Bill Guest, says many farmers in the north are taking drastic measures because of the continuing lack of rain.
Mr Guest says many dairy farmers have run out of feed, and have been trying to keep their cash flow going by buying a lot of palm kernel and other supplementary feed. Many have dried off their cows.