The new $2.5 million water treatment plant built beside the reservoir in Raetihi opened on Sunday to a crowd of hundreds of local people and Iwi.
Ruapehu District Council mayor Don Cameron said it was a great, great day.
"We were thrilled last year to be awarded a grant of $1.5m from Government to build the new treatment plant.
"Council added another $1m and we were able to get the project under way almost immediately.
"The new treatment plant will make a significant impact on the taste and odour issues in Raetihi,'' he said.
Many locals have described the water now in Raetihi as probably the most delicious in New Zealand.
Cameron said the level of the Makotuku river flow influenced water quality and the water needed the treatment by large-scale filtration.
Water was piped, using gravity pressure, from the settling ponds 7.4km to the Raetihi water treatment plant.
"It's all about large-scale filtration which is a huge upgrade for Raetihi.''
A diesel spill that began on September 26, 2013 at the Turoa Ski Area leaked 19,000 litres of diesel into the Makotuku waterway. The small river supplies Raetihi's water and the town was without drinking water for three weeks.
Ruapehu Alpine Lifts was later prosecuted and pleaded guilty to four charges. It was fined $300,000 for three of them.