Council water services manager Marty Pacey said a large mains pipe "failed" early in the day, causing subsidence and a slip.
"This may have been caused by saturated ground following the weekend’s weather, but we’re investigating that."
The council became aware of it early on Monday and immediately set to work, at the mountainbike track at Glenwarren reserve, Mr Pacey said.
A water tanker was arranged to be brought to Stoke St by 2pm for affected residents.
"We had already provided Observatory Village with bottled water before then," Mr Pacey said.
South Roads made a temporary fix, enabling water to be restored by 8pm.
Mr Pacey said future replacement of a longer section of pipe up to Stoke St was being considered.
He thanked their contractors and staff for working a full Labour Day to fix the pipe, and extended his gratitude to local residents who were "patient and understanding as we worked to resolve the problem".
