Seven houses have been flooded and slips are blocking roads in the Central Otago town of Roxburgh after a storm.
An evacuation point has been set up at the Roxburgh Fire Station after the flooding in Tweed St on Sunday.
The local council says water must be boiled as a power outage means the water is not being treated. A water pipe has also blown out in the town.
The Vodafone network is not working in the area, the council says.
"What a thunderstorm can do to your day - weather trace from Roxburgh shows temperature falling almost five degrees in an hour while 30mm of rain falls," MetService tweeted.
Police are advising motorists to avoid all travel to the area.
Roxburgh is inaccessible from the south, as Teviot Rd, where there is a slip, was the diversion for two previously reported slips on State Highway 8.
People wishing to travel to Central Otago from the south will need to consider travelling via SH87 and SH85, or SH6 from Southland.
Earlier MetService warned thunderstorms may be severe in inland parts of New Zealand and flash floods were possible.
Weatherwatch.co.nz said daytime heating plus converging winds had helped create significant downpours and thunderstorms around Otago on Sunday.
Central Otago and others areas had earlier been affected by a heatwave.
About 600 people live in Roxburgh. The town is in a fruit growing region.