Mosgiel has been under compulsory level one water restrictions, which limited some water usage to between 8pm to 8am, since January 16, a period of almost seven weeks.
Compulsory water restrictions were last in place during 2007-08 for a period of nine weeks.
Dunedin City Council group manager Three Waters David Ward said the recent rain and cooler temperatures Dunedin had received meant the level one water restrictions could be reduced to voluntary levels.
Despite the change, the long-range weather forecast of warm, dry conditions could force the council to reinstate the stricter conditions in Mosgiel, he said.
Parts of Dunedin had rain over the weekend and more could be on the way later this week.
About 27mm of rain fell in Dunedin overnight on Saturday, MetService forecaster Gerard Bellam said.
In Dunedin, isolated showers were expected tomorrow, and on Thursday some of the showers could be heavy, he said.
In the month of February, the city received 48.8mm of rain.
Mosgiel now joined all areas of Dunedin, including Outram, Waikouiti, Warrington and Karitane, under the voluntary restrictions.
Under voluntary levels, residents are not required to reduce their water consumption in order to avoid moving back to higher restrictions.
Restriction levels would be reviewed again next week.
