Acting chief executive Craig Cameron said there had been residents at the end of the water lines who were getting no water at all during peak times.
"This is unacceptable," he said. "The pumps are not keeping up with demand and while we are working as fast as possible to bring more pumps on-line, in the meantime we have no choice but to force a drop in demand."
The restriction meant a total ban on sprinklers, although residents could use hand held hoses to water their gardens every second day, between certain periods. The watering of most sports fields and gardens was also being suspended, while splash pad hours in Cornwall Park, Flaxmere Park and Camberley were being reduced.
Mr Cameron said if significant progress was not made council would have to consider stronger enforcement measures - such as raising restrictions to level four, which means no outdoor water use at all.
This issue is not limited to Hastings - earlier this week Napier City Council asked residents to conserve water following "unprecedented demand".
Director Infrastructure Services Jon Kingsford said the council was monitoring the situation daily, and would "definitely" consider putting restrictions in place.
"At this stage we don't believe we're going to run out of water, it's more an issue of the pumps filling our reservoirs struggling to keep up," he said.
Reservoirs were being emptied as fast as they could be filled, he said, and the peak demand period for water had expanded to include all daylight hours.
"But we can all do our bit to ensure there's enough for everybody," he said.
Council's water usage would be reduced where possible, he said, including the reduction of watering at parks over the next few weeks.
If restrictions were needed, they would initially be similar to those Hastings had before raising the level yesterday.
However, Mr Kingsford said reducing the total daily consumption of water by 10 per cent might be all required to avoid restrictions on water use.
Central Hawke's Bay has had restrictions in place since before Christmas, with hosing restrictions for the main centres, and a full water ban for all but domestic use in Kairakau.