The digger, which was excavating the road on the east side about 4pm, broke off a 100mm connection to the 375mm water main at the pedestrian crossing by the World War 1 monument.
Water gushed from the connection, hitting recently filled excavation work and throwing stones and debris into traffic in the western lanes.
The street had to be closed until a front-end loader was driven in to deflect the water, stopping it hitting the road and the buildings opposite.
Fulton Hogan is performing major reconstruction work on the road surface and on the kerbing and channelling along lower Thames St, working north from Itchen St, for the Waitaki District Council.
A lake developed in front of the council's headquarters before the main could be isolated.
Water manager Martin Pacey said it would take several hours to clear the water.
The main, installed in the 1880s, was isolated at Wear St, leaving businesses on each side of lower Thames St to Itchen St without water.
It was expected work would be completed last night and water restored to businesses by this morning.
