It was picked up at some point after the New Year.
The test sample had been taken on 8 December.
Authorities initially thought it might be a localised problem, but yesterday tests results showed lead in the reservoir that supplies both towns.
Karitāne School Board of Trustees chairperson Jane Schofield said the water in the area has never been great, and for 12 years she has been driving to and from Dunedin in order to get drinking water.
"We have carted water from town [Dunedin] because the water is revolting here. And now to find out that it's actually not even safe to be consuming, it's just horrifying," Schofield said.
Authorities have warned residents not to boil the water, saying that does not remove lead but instead increases its concentration.
"We boil water, thinking that that's going to make it taste better," Schofield said. "But actually to find out that it concentrates the levels of lead, so we've possibly been making it worse."
Schofield said the fact that the first spike in lead was detected in a sample taken on 8 December has shocked residents.
"Really upset about it ... my family's probably had the least exposure because we do cart water and we have been very careful.
"I know that there are a lot of families that boil the water. They've been this boiling this water for eight weeks since that first test," she said.
The length of time it has taken for the public health warning to be issued also has Karitāne resident and local community board member Andy Barratt worried.
"It certainly is a matter of concern and the community board is working at the moment to establish all of the information that we can and clearly through the board, we would be putting those concerns back to the DCC," Barratt said.
Southern DHB medical officer of health Dr Susan Jack said initially they suspected the contamination was very localised, but all that changed after new results on Monday.
"Then another test result came through just this week, which indicated a higher level at the reservoir level. So that has triggered us deciding to make it for the whole water supply until we can work out what's going on," Dr Jack said.
The maximum accepted level of lead in drinking water is 10 micrograms per litre.
Test results show the levels to be as high as 39 micrograms per litre.
The council said the high readings are intermittent and some samples have been normal.
At the highest levels recorded, Jack said people could experience acute symptoms if consuming high levels.
"In young children and babies, low levels don't cause any obvious illness. But higher levels can cause symptoms like vomiting or stomach pains or difficulty sleeping and low chronic levels may cause an impact on children's development," she said.
Jack said adults' gastrointestinal and nervous systems could be affected, and chronic lead poisoning could see mood changes, headaches, tingling, numbness, nausea and diarrhoea, or even constipation.
In the meantime, Karitāne and Waikouaiti residents can collect clean water from tankers.
In Karitāne, water is available at the community hall, the Karitāne Reserve playground area, and the Hawksbury Village entrance.
In Waikouaiti, the locations are the Golden Fleece Hotel, 165 Beach Street, and on Seddon Street, opposite the police station