Dunedin City Council central city plan project director Glen Hazelton said some of the pipes in the central city dated back to the late 1800s.
Replacing infrastructure which had reached the end of its useful life was crucial to maintain the safety and continuity of essential services, Dr Hazelton said.
More enabling works to prepare for the George St retail quarter upgrade began on Tuesday with a focus on parts of Frederick, Filleul and London Sts, he said.
This followed the successful completion of the first phase of enabling works in lower London St last year, when 600m of old pipework was replaced.
Parts of London, Filleul and Frederick Sts would be closed during the period of the work, but resident and business access would still be available.
Contractor Isaac Construction was expected to have the work completed by April, depending on weather conditions.
The works would support the wider George St upgrade by improving traffic flows, road safety and access to car parking in the area.