Council said the inspections had shown that leakage from the floor was highly unlikely.
Other potential causes were under investigation.
Once the cause is known, staff will plan the required repairs and implement system and process improvements.
The repairs may require the dam to be emptied but council staff said those repairs will be planned while carefully considering the impacts on water supply to Dannevirke, ensuring that disruptions are minimised.
Dannevirke has been on level one water restrictions for some time, meaning alternate day restrictions for use of hand-held hoses.
Mayor Tracey Collis said there would be no further water restrictions for the time being.
"This is a mangeable situation."
She added there would be no impact on the water supply to Dannevirke for the time being other than the current restrictions already in place.
"Our water source [Tamaki River] is currently sufficient and we can draw water directly to the water treatment facility, whilst we focus on remediating the leak in our water storage dam."
Council considered the matter a high priority.
"We appreciate that this will cause concern to some residents and commercial water users.
"We are trying to keep any disruptions to a minimum, whilst at the same time ensure that thorough repairs are made to Dannevirke's water storage.
"Council will provide regular and continuing updates through the usual communication channels.
"We are very thankful to all Dannevirke residents for their efforts in conserving water, and for their patience, understanding and collaboration to help us maintain our water supply."