Flooding has badly damaged Pahiatua's main water supply and the town is now on its back-up supply.
Tararua District Council says the intake structure, where water is collected, was washed out by 10 hours of rain on Monday.
Civil Defence controller Peter Whimsett says it could take several weeks to fix the main supply, so water restrictions are in place and people in Pahiatua should continue to boil all drinking water.
While some rural roads have been washed out and farmland has been flooded, Mr Whimsett says the town has had a lucky escape.
The Mangatainoka river was flowing at 1.4 million litres a second on Monday, twice the record peak levels of 2005.
District Mayor Maureen Reynolds says the situation came close to crisis: another two hours of rain, she says, could have caused major problems.