Touching or swallowing the water could cause skin rashes, nausea, upset stomach and tingling and numbness around the mouth, Dr O'Connor said.
Anyone experiencing those symptoms should see their GP.
His advice was to stay well away - but he was aware not everyone would take it.
"You can only tell people; you can't force them."
While some people cancelled their bookings last weekend, others went for a swim.
Volunteer campground caretaker Martin Smith said algae were denser in the shallow edges of the lake, and children and dogs should avoid splashing around there. He thought swimming in the deeper middle of the lake would be okay.
He tells everyone about the high level of algae as they book in.
Rangitikei people have struggled to keep the lake area open for camping, swimming and boating, and it is now run by a group called Dudding Lake Ltd.
Its operator, Bruce Gordon, said the raised algae level might have happened because lake weed was sprayed and is now rotting, providing nutrients for the algae.
He didn't think the cause would be nutrients from farm run-off - the lake has forest to the west, and mown campground around it.
Horizons Regional Council's Barry Gilliland, who checks algae density in local lakes, said algal growth was a worldwide - and New Zealand-wide - problem. Pauri, Virginia and Wiritoa lakes have their own problems with algal blooms.
The algae species at Dudding Lake is rarely toxic, and is not in this case. But when algae are at high densities, substances they contain can irritate people prone to allergies.
New Zealand guidelines say warning signs should go up when algae exceed 10 cubic millimetres per litre. Last Thursday at Dudding Lake the levels were 28 and 50 cubic millimetres.
When Rangitikei District Council decided to stop running the lake as a camping and picnic area, local people stepped in to keep the place running, making contributions, financial and in kind, to upgrade the facilities.
Mr Smith and his wife Margaret are voluntary caretakers and are proud of what the place can offer.
They said it had been very busy, with campers, motorhomes and people picnicking, swimming and boating.
DUDDING LAKE
half way between Turakina and Bulls
centre 18-20m deep
donated to public by John Dudding
sandy beach
toilets
hall for hire
25 powered camp sites
walkway around lake
swimming
boating, jetskis, biscuiting