Thousands of litres of water flooded down The Mall after a pipe gave way near Reading Cinema, about 7.15pm.
Water supply was restored overnight to CBD businesses affected by a burst water main yesterday.
Queenstown Lakes District Council general manager property and infrastructure Peter Hansby said contractors Veolia repaired the pipe by 1am.
They and council staff were now focused on cleaning up and assessing the repairs to paving.
Rees St had opened to business and traffic, although some car parks remained unavailable to allow cleaning.
The damaged area of the Mall had been fenced off providing access to all shops and businesses on either side of the damaged site.
Minor leaks had also been identified at locations on Church St and Marine Parade, which Veolia were currently investigating and managing.
It was likely these were a result of redistributed pressure from shutting off the burst main in the Mall.
The QLDC said in a press release this morning the clean-up was focused on clearing access routes to businesses for workers and visitors.
Silt was being removed from Rees St to reduce further spread by pedestrians and vehicles.
QLDC inspections confirmed no silt had entered Lake Wakatipu.
QLDC assessments of the Queenstown Mall indicated the damage was largely at a surface level.
Following a complete clean up, it was likely some cobblestones will need to be re-laid.
The cause of the burst main was also being investigated by QLDC contractors Veolia, but current assessments suggested a joint or material failure.
Mr Hansby said he was pleased with the response to the incident from all parties involved.
"The crew mobilised to the town centre ahead of any notification from the site as their systems had alerted them something was wrong.
"Our main priority has been minimising the affect to businesses, local residents and visitors and ensuring no impact to the lake.
"I’d like to acknowledge the hard work of the team through the night to make sure roads and businesses were open this morning,” he said.
There was a danger it had created sinkholes.
''It's eroded underneath,'' he said from the scene last night.
''The priority for us is ensuring people don't end up in a sinkhole.
''There was significant pressure built up. It's caused [holes] all the way down - you can see water coming out down the bottom [of The Mall].
''All those places could easily be five or six feet [1.5m-1.8m] deep or more.''
Two Queenstown fire crews responded, closing The Mall, Rees St and Marine Parade. The water flooded from about halfway down The Mall into Lake Wakatipu.
It is likely to be closed for some time. Council contractors and Veolia staff were due on scene last night to assess the damage.
''We're waiting to hear from the water authorities, but the flow has definitely slowed," Mr Bary said about 7.45pm.
''When we arrived there was 10 times the flow you see now, but obviously substantially less than when it first blew."
At least one business, Pog Mahone's Irish pub on adjacent Rees St, was partly flooded.
Manager Scott Walsh said: ''It's come in about three or four foot through the door.
''It was just very sudden.
''But in the last 20 minutes it's not come any further so we might be looking good. From here it looks like the other businesses have done OK.''
