The upgrade project, which included connecting the Bannockburn wastewater system to Cromwell, was completed in November and cost ratepayers $8million.
It was the first phase of the Central Otago District Council's 10-year plan to improve the quality of the district's urban wastewater discharges.
Council major projects manager Simon Norton said the E. coli levels in Lake Dunstan had decreased dramatically - from 10,000 to two E. coli per 100ml - due to the upgrade.
"It's a major achievement.
"We're meeting all our consents by some margin in most places.''
New technology installed at the wastewater treatment plant includes New Zealand-designed aquarators, which mix air into the ponds to allow bacteria and algae to break down harmful matter and clean the water.
The filtering process is chemical-free.
Council infrastructure services executive manager Julie Muir said regular monitoring of the discharge flow had been occurring over the holiday period.
"We measure the wastewater quality and the material that is discharged,''Ms Muir said.
"We haven't had any issues.''
Deputy mayor and Cromwell Community Board chairman Neil Gillespie said while the previous Cromwell discharge scheme did not cause significant environmental health issues, it "didn't make it right.''
Holiday-maker Chris Henderson (45), of Dunedin, has been coming to Lake Dunstan for nearly 30 years.
Mr Henderson said he and his family had noticed fewer weeds in the water at the Bannockburn Inlet.
"We've had the jet ski out. It's been fantastic here.''
