Around 6,000 customers have been told not to cook, drink or wash with their tap water following concerns over its taste and smell.
Nine schools in North Lanarkshire have been closed as a precautionary measure as Scottish Water investigates the problem.
The company has spent the night looking into the issues after customers reported concerns about the mains water.
The affected properties are in parts of Carfin, Newarthill, Chapelhall, New Stevenston and Dalziel Park in North Lanarkshire.
Scottish Water is delivering bottled water and notices, advising people not to use the water, to households and businesses in the area.
Customers are asked not to use boiled tap water, and to use their water only for flushing toilets.
A Scottish Water spokesman said: “After receiving contacts from customers about the taste and smell of tap water, we investigated thoroughly and examined our network. We have advised customers in Carfin, Newarthill, Chapelhall, New Stevenston and Dalziel Park not to use their water for any purpose – other than flushing toilets – as a precautionary measure.
“We apologise for the inconvenience this has caused and we have been distributing bottled water to affected properties during the night.
“We have had teams out in the affected areas all night assisting customers and are investigating the issue as a matter of priority.
“We will issue further updates when more information becomes available, and we will closely monitor the network and advise when the water is back to normal.”
Scottish Water said it will ensure that assistance is provided to customers who require additional support such as the elderly, disabled, hospitals and care homes, as well as the wider community.
The company is advising people not to use the tap water until further notice.
Scottish Water chief operating officer Peter Farrer said that investigations were under way.
He told BBC Radio Scotland: “We’ve been advised of an oily based substance. This has got a strong odour to it so most customers are not drinking it because they can detect an odour from it.”
He said 100 people have been working through the night delivering bottled water, reaching 3,000 to 4,000 properties by around 7am. They expect to reach the remaining couple of thousand by midday.
The nine schools closed in North Lanarkshire are Taylor High School, St Theresa’s Primary, Brannock High School, Keir Hardie Memorial Primary, Our Lady & St Frances Primary, New Stevenston Primary, St Patrick’s Primary, Chapelhall Primary and St Aloysius Primary.