Queenstown Lakes District Mayor Glyn Lewers, who lives in Frankton, said he was made aware of the issue at the Shotover wastewater treatment plant yesterday morning.
Isolating at home with Covid-19, he had not smelled the offending odour, but he was aware there were reports from Queenstown Airport.
He had also heard of people driving past the facility who had said "it smells a bit off-putting".
The treatment plant was relatively "modern and new" and for it to have issues was unexpected.
Earlier this year, Queenstown Lakes council staff scrambled to deal with another Three Waters issue when about 60 cases of cryptosporidium confirmed in the resort area were linked to the drinking water supply.
"We deal with one water problem and we get another," Mr Lewers said.
"You just have to roll with it; you just deal with it - that’s the only thing we can do.
"It’s unfortunate and there’s probably a few questions we’ll ask afterwards about why it got to that point.
"I know, talking with the council officers and the general manager of infrastructure, they’re taking this very seriously."
In a statement yesterday, council property and infrastructure general manager Tony Avery said there was an issue with the sludge processing and dewatering system at the facility.
Work was under way to resolve the issue, he said.
"The system in need of maintenance is essential for keeping the biological processes that are responsible for the treatment of wastewater healthy," he said.
"I’d like to acknowledge and apologise for the odour that has been noticed around the Frankton area.
"We hope to have repairs in place and the smell under control as soon as possible."
A council statement yesterday said the Otago Regional Council had been informed of the odour and the district council was providing daily reports on smell coming from the facility to the regional council’s pollution team.
