The new system would provide better quality water supplies to households in the settlement, he said.
"There have been taste and odour issues at times ... this will be be a more consistent and robust supply for Featherston."
Wairarapa MP John Hayes said it was a great move for the community.
"This will help South Wairarapa District Council provide safer drinking-water to the Featherston community ... the subsidy will allow the council to build two new bores, the associated pipe work, and improve the current UV filtration system. This will mean the drinking water supply will meet the Drinking-Water Standards for New Zealand, he said.
"It's great news for the local community that the Government has been able to provide this subsidy to help ensure the health and wellbeing of the people of Featherston."
The Drinking-Water Subsidy Scheme is open to communities with a deprivation index of seven and above and the water supply will serve a permanent population of between 25 and 5000 people. The subsidy covers up to 85 per cent of total project costs, with $10 million funding available each year until 2015.
"With two funding rounds of the scheme still to go, I encourage any other eligible communities that may be thinking about applying to do so," Mr Hayes said.