Levels of arsenic higher than the acceptable level for drinking water have been found in the Hawea Flat Kindergarten's supply.
During regular testing the water was found to contain arsenic at a concentration higher than the New Zealand standard.
Any level of arsenic above 0.01mg per litre is not considered suitable for drinking.
Parents have been asked to give their children bottled water to bring to school.
The kindergarten, like most homes in Hawea Flat, uses a bore for its water supply. Water comes from either the Hawea Flat aquifer or the High Terrace aquifer.
The kindergarten is owned by Kidsfirst Kindergartens, a Christchurch-based company.
Chief executive Sherryll Wilson said because water quality was a long-standing issue in the Upper Clutha area the kindergarten regularly tested its supply.
''The health and wellbeing of children and staff is our number one concern,'' she said.
Bottled water would be used in the short term and a longer-term solution was being investigated, Ms Wilson said.
Arsenic occurs naturally in all soil and water, but the chemical can leak into groundwater from old agricultural and industrial sites.
Neighbouring Hawea Flat School uses a different bore for its water supply.
Principal Sue Heath said the kindergarten had advised the school of the situation and as a precaution it would ask pupils to bring bottled water.
Monthly testing of the school's water was due this week but the school had asked the contractor to come as soon as possible, Mrs Heath said.
A letter had been sent to parents letting them know the situation, she said.
Otago Regional Council communications team leader Mark Peart said the council knew of the situation and was trying to find out more about it.
Anyone who knew of a water contamination issue should contact the council as soon as possible through its pollution hotline, Mr Peart said.
A spokeswoman for Public Health South said it was aware of the situation but could not provide any more information.
