The fire brigade and council contractors cordoned off a section of Beaumont St yesterday afternoon as they worked to pump water from the flooded property and locate the source of the underground leak.
Water access was cut off to several nearby properties, including Mount Aspiring College, to try to stem the flow.
By 3pm, however, water continued to surge on to the street and the flooded property.
A council contractor on site said they were still trying to locate the nearest valve, and could not say how long it would take to fix the problem.
While he could not be certain about the cause, "ageing infrastructure" was likely to blame.
"It’s just one of those things."
Grant Lawrie, a builder who had been renovating a unit at the back of the flooded property, said the water had started rushing in about 12.30pm.
"It happened very quickly.
"Pretty much bang, it was flooded."
While the unit he was working on was unaffected, water had risen to 12cm or 15cm inside the house at the front of the property.
The house was vacant and the property owners had been notified, Mr Lawrie said.
In a Facebook post, the college said it would be closing for the day as the school was without water.
The Queenstown Lakes District Council said in a statement contractors were working to restore water supply to "several areas of Wānaka".
"A burst water main on Beaumont St activated the automatic shutdown valve at the reservoir."
It aimed to have water restored to some areas yesterday evening, but the supply for Beaumont St and some neighbouring streets would remain off as work repairing the main continued.
"We acknowledge the inconvenience for those affected including the Mount Aspiring College community after the school was closed earlier this afternoon due to a lack of water."