A runner reported the problem to the Queenstown Lakes District Council just before 7am yesterday.
The pipe was shut down within a few hours.
The pipeline - which burst about 500m from the start of the track from Arrowtown - is owned by Arrow Irrigation Company.
Council spokeswoman Michele Poole said it was too soon to say how long repairs would take, adding: ''That will be the company's responsibility.''
In a statement, the council said: ''An initial inspection by council engineers and contractors confirmed that a section of the path above the pipeline had fallen away, and the vehicle track below was at risk of further slumps and slips.''
The council said vehicles at Macetown overnight could be driven out through the riverbed.
Ms Poole added: ''We don't know if there were any vehicles on the other side of the washout - if the route had been completely impassable, we would have contacted the police to check.''
Traffic could not now pass through the washed out area because of the risk of further slips, the council said.
Signs and warning tape are in place.
Walkers or mountainbikers can use use one of the alternative tracks to Macetown until the washout is repaired. On social media, the council said alternative walking access is via ''New Chums''
.
