Napier City Council's Manager Asset Strategy Chris Dolley said the Enfield Rd reservoir is made up of two tanks - the largest of the two has returned consistently clear results however the smaller of the two has tested positive for e.coli.
"This temporary closure has placed stress on our other water assets, which means we now need to - unfortunately - move to restrictions. All of our reservoirs are currently critically low.
"We understand that this isn't ideal but we are really hopeful that our Napier residents will do what they can to reduce their water consumption over Waitangi weekend."
Level 2 water restrictions will remain in place for at least the next three days.
All Napier City Council facilities and departments are also following strict water conservation recommendations.
Non-essential water use has been halted - for example, the National Aquarium of New Zealand is recirculating water rather than drawing on new - and alternative non-potable water supplies are being used for watering of public land.
Households are advised that hoses and sprinklers can be used 6-8am and 7-9pm only, and only every second day.
Hastings District Council has imposed similar restrictions for Hastings and Havelock North.
Addresses that are odd numbered should water on odd numbered calendar dates only. Addresses that are even numbered should water on even numbered calendar days.
"Shorter showers, only running full loads in the washing machine, and refraining from washing cars and pets will also help," Mr Dolley said.
"Conservation is key, and every little bit counts."
Although Napier has plenty of high quality water in the aquifer, the issue is related to the capacity of the pump, pipes and reservoirs to deliver this precious resource to our residents, Mr Dolley said.
Council staff are working through the weekend and updates on both the e.coli testing and water restrictions will continue when available. A full update on the situation will be made available on Tuesday February 7th.