Dunedin's drinking water is potentially contaminated and the city's council has issued a boil water notice.

Much of the city's north, including the CBD, North Dunedin, Leith Valley, Woodhaugh and any area in the central city between the town belt and the harbour is affected.

Water tankers are at the Octagon at 12pm & George Street Normal School at 2pm. Bring your own containers, Do not rinse them using tap water.

— Dunedin City Council (@DnCityCouncil) August 15, 2017

The council has activated its emergency operations centre as it races to flush the water from the city's supply. Dunedin Hospital has also activated its emergnecy centre and was relying on water tankers arranged by the council to supply fresh drinking water, council infrastructure and networks general manager Ruth Stokes said.

Eight water tankers have been sent to other parts of the city, including to George St Normal School and Logan Park High School, in the affected area, she said.

Residents will have to boil their water until tomorrow afternoon, but people are already rushing to buy bottled water.

A hospitality worker gets water from a tanker in the Octagon. (Photo / Chris Morris, Otago Daily Times)

Stokes told the Otago Daily Times untreated raw water from the Ross Creek Reservoir may have entered the water network on Sunday, when workers began releasing water from the reservoir into the Lindsay Creek in preparation for planned work in the area, she said.

People started complaining last night and this morning, prompting an investigation, which found an old pipe - no longer recorded on council plans - below the reservoir.

The Dunedin City Council's boil water notice has resulted in a rush of people buying bottled water. (Photo / Louise Frampton, Otago Daily Times)

The pipe connected to the city's drinking supply, allowing raw water back into the network, she said.

The raw water came from a "protected catchment", and would have been diluted as it mixed with the city's treated drinking water supply, but the health risks were not yet known, she said.

"You're basically drinking water that's the equivalent of drinking it straight out of a stream or lake.

By lunch time the shelves at Dunedin central's Countdown were almost empty of bottled water. (Photo / David Loughrey, Otago Daily Times)

"I can't tell you with any certainty what risks are associated with that water."

The council's boil-water notice has resulted in a rush of people buying bottled water.

By lunch time the shelves at Dunedin central's Countdown were almost empty of bottled water.

A map of areas part of the Dunedin City Council's boil water notice. (Graphic / Dunedin Council)

The University of Otago has texted students warning them to not drink water from the tap.

At least one central Dunedin cafe has stopped serving coffee and other drinks containing tap water.