A red or high-alert level warning for blue-green algae has been issued for Wyangala Dam and the Lachlan River downstream of Wyangala Dam.
A statement released by NSW Water says that people should not undertake recreational activities where they may be coming into direct contact with the water such as swimming.
"People are advised not to enter the water, not to drink untreated water or bathe in water drawn from the dam," the advisory said.
"The species of blue-green algae identified are potentially toxic and may cause gastroenteritis and other heath issues in humans if consumed. Boiling the water does not remove algal toxins."
Town water supplies remain safe.
Lachlan River downstream of Wyangala Dam is also on red alert.
"Stock managers and domestic users that source their water from either the storage or the river downstream of the storage are advised to use alternate water supplies," the advisory said.
"Those further downstream are advised monitor water supplies for algae scums and switch to alternate supplies if unusually high algae concentrations are observed."
Blue-green algae usually appear as green paint-like scums on the water, near the edges, or as greenish clumps throughout the water.
It makes the water appear dirty, green or discoloured and generally has a strong musty or earthy odour.
A guide to the identification of algae can be found on the WaterNSW website: https://www.waternsw.com.au/water-quality/algae/identifying-algal-blooms
People should not eat fish, mussels or crayfish from red level warning areas.
Blue-green algae occur naturally and can reproduce quickly in favourable conditions where there is still or slow-flowing water, abundant sunlight and sufficient levels of nutrients.
It is not possible to predict how long the algae will remain at high levels.
Regular monitoring will continue and the alert will be lifted as soon as the high levels of algae dissipate, NSW Water said.
People who believe they may have been affected by blue-green algae are advised to seek medical advice.
Updates about blue-green algae blooms and red level warning areas can be obtained by calling or visiting - http://www.waternsw.com.au/water-quality/algae, or calling 1800 999 457