The Marlborough District Council is using an alternative water supply after toxic algal bloom was found in the Barnes Dam just out of Picton.
Tests found low levels of toxic cyano bacteria, which may have been carried downstream during heavy rainfall yesterday.
The council said the levels were not dangerous but signs have been put in place around the dam and nearby Waitohi stream, and people were being warned to keep children and dogs out of the water.
They said algal bloom was common with such hot, dry conditions.
Household water supply had been moved to an alternative well until the dam level drops and the risk subsides.