Arrowtown School's roll could rise by more than 40% by 2019 if four Special Housing Areas (SHA) proposed for the township proceed.
Queenstown Lakes District councillors must decide on Wednesday whether to recommend the SHAs to Minister for Building and Housing Nick Smith for approval.
A council-commissioned Ministry of Education report on the impact of the SHAs says a new school might have to be built.
If all four were approved, the school's roll was projected to rise from 586 next year to between 670 and 699 pupils in 2019.
The school's proposed master plan - aimed at addressing weathertightness issues in several of its buildings - provided capacity for 575 pupils. Up to $4 million would have to be spent on buildings to accommodate the additional growth.
At that point the school's 2.7ha site would reach capacity and a new school would have to be built.
''This would require an additional $15 million-$20 million, assuming a suitable site could be acquired within Arrowtown.
''The ministry suggests that SHAs in other parts of the Wakatipu Basin would have a lesser impact on the schooling network.''
The report does not consider the impact of changes to residential zoning in the township, proposed in the district plan review, which could increase housing density and generate even greater roll growth in the coming years.
Arrowtown Village Association acting chairman Wayne Hulls said the report backed up the association's stance on the likely impact of the proposed SHAs on the township.
The school was already ''tight for space''.
''It's going to get tighter as it keeps growing and there are no more spaces in Arrowtown for a school.''
Councillors must also consider another council-commissioned report, focused on housing demand in Arrowtown, which recommends they support the SHAs proposed for the township.
The report by consultants Insight Economics highlights a ''gap in the market'' for more affordable homes.
There was demand for up to 140 houses in the township in the next three years, but only a fraction could be developed over that time.
Mr Hulls accepted councillors were facing difficult choices, but said it would be ''illogical'' to approve the SHAs proposed for Arrowtown because of the ''money and effort'' the council had put into an urban boundary.
''It would be a complete flip-flop on the position they've run for the last seven years.''
