An engineer, a flood prevention manager, contractors, the Wānaka Fire Brigade and a digger were on site working to control the water flow this morning.
An engineer on site said a controlled water release was the best of two bad scenarios.
Letting the pond burst would have created a "tidal wave'' of water that would have been even worse.
A steady stream of water could be seen flowing down hill at 10.30am.
Two fire appliances were on site using portable pumps to clear sediment water from a property on Mount Roy Terrace, which is next to Wineberry Lane.
They said the water level was coming down, but expected emergency services to be on site for most of the day.
A QLDC spokesman said they were aware of the situation and had contractors onsite alongside FENZ.
"Our priority is working to fully understand the cause and origin of the flooding, and its impact on residents.
"We’ll be able to share more information in due course."
Police were also present on Aubrey Rd managing traffic flow around a large pool of water where the portable pumps were releasing the sediment water.
In a statement released by the QLDC shortly before 4.30pm, a spokesperson said this morning's incident "appears to be related to a failure of erosion and sediment controls" on a private property after heavy rain overnight.
"The property owner, council contractors and emergency services have worked to prevent any further flooding and pump water from affected properties.
"Council’s monitoring and enforcement team are investigating the incident. As such, it isn’t appropriate for council to make any further comment until this investigation is complete."
- additional reporting by Regan Harris
