Residents' spokesman Phil Leydon told a Queenstown Lakes District Council's utilities committee they were "aghast" at the use of concrete debris, nails, screws, wire, plastic and even a microchip by a council contractor on Friday.
He presented plastic bags and tubs containing the material to the meeting and said it was a "potential toxic hazard" and a definite hazard to people who drove on the road.
He pointed out between 80% and 90% of people living on Morven Ferry Rd got their water from ground water supplies.
"What is this stuff going to do to our water?"
Questions were asked about where the material came from and whether it contained asbestos.
"Someone has knowingly deposited hazardous waste on a road in our region and made a profit out of it," Mr Leydon said.
QLDC roading manager Ian Marshall apologised to the residents, saying the material was "totally unacceptable", then left the meeting to speak with contractor Downer EDI Works, which had started to clean up the road.
"This is really embarrassing for everybody and a poor-quality effort," Mr Marshall said on his return.
After contractors had done a walk over the properties affected, the road would then be reinstated with "proper gravel", with contractors meeting the cost.
Utilities committee chairman John Mann said he was concerned by the mistake.
"What I want to know is . . . how did this happen in the first place? "
An investigation will be carried out.
QLDC chief executive Duncan Field, Mr Marshall, Mr Mann and a representative from the contractor were to meet residents on-site last night to discuss their concerns.
Mr Field, in a statement, said he was grateful to residents for flagging what were "clearly unacceptable levels of service".
"It will not be repeated," he said.
