Blue-green algae has been discovered in the Barkers Creek Reservoir near Harcourt, Coliban Water has announced.
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The water authority is urging visitors to the reservoir to avoid contact with the water.
"We are closely monitoring the presence of blue-green algae at Barkers Creek and we will keep the community updated on any changes to this advice," Coliban's manager customer operations Steve Dunlop said.
The algal bloom has also disrupted the delivery of water to rural properties in the area.
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"As a result of this algae bloom we switched the supply to the Coliban Main Channel so that our rural customers can continue to receive raw water that is free from blue-gree algae," Mr Dunlop said.
"This change took place on Saturday, January 16 and water from the channel will help flush water from Barkers Creek Reservoir.
"Most of our rural systems do not have an alternative supply so it was fortunate that we did have the ability to change the water source in this instance."