The North Island town of Pahiatua has issued a boil water notice after E coli was discovered in the source of the town's water supply.
The notice was issued at midday on Friday, after the supply tested positive two days in a row.
Tararua District Council said it had started chlorinating the water supply, but nobody was sick at this stage.
Tararua district mayor Roly Ellis said the contaminated water was being flushed out of the pipes, but residents should be cautious.
"They need to boil their water for three days after we get the first negative result, and then we keep taking samples every day, the boys are down there flushing the old water out, but it does take a bit of time so that we get chlorinated water going through the whole system."
It comes weeks after people started becoming ill from a campylobacter outbreak due to infected water supplies in Havelock North.
That illness was thought to have affected more than 5200 people, New Zealand's biggest recorded water-borne illness to date.