Southern DHB medical officer of health Susan Jack is recommending that as a precaution, households not use tap water for drinking, cooking or preparing food while the source of the contamination is being looked at.
The water is still safe to use for bathing, washing hands and clothes.
However, boiling the water does not remove lead, and rather can increase its concentration in water.
"We do need to rule out the risk that the elevated readings are the result of the contamination of the wider water supply," Jack said.
"We understand this news will be concerning. We are acting from a principle of caution, and wanting to give the community as much information as possible as we work to understand the situation."
Dyer said the water was sourced from the Waikouaiti River and supplied about 1500 people in the Waikouaiti and Karitane townships.
Water tankers are being arranged for several locations so that people have access to clean drinking water. Locations will be advertised as soon as they are available, the council said.
Dyer said the source of the lead was unclear.
"The sampling was being undertaken as part of an asset management investigation, rather than drinking water standards monitoring. We were not expecting these unusual results, but they warrant a precautionary approach. Subsequent water samples have not shown elevated levels of lead," he said.
"We're ramping up our sampling, but at this stage, it is unclear how long the water notice will remain in place. As soon as we know more, we will share this information with the community."
