Hunter Water says a third party working near the Wallsend Bunnings Warehouse burst the underwater water main that connects to home in Fletcher and surrounding suburbs.
The bust was causing significant water pressure problems to the western suburbs of Newcastle.
The utility's spokesperson, Nick Kaiser, said service crews were at work to get pressure back to normal.
He said areas that were at higher elevation levels will not have their water pressure return to normal until Thursday evening, while low-lying areas were connected earlier in the afternoon.
While the main was repaired, Hunter Water was providing residents with fresh water free of charge to take home.
Pressure very slowly coming back 2 Fletcher area. Supply coming thru smaller main while break is repaired. Tricky repair as it's under water pic.twitter.com/q839Pcrb2i— Hunter Water (@HunterWater) March 22, 2017
"Hunter Water sincerely apologises to all of those residents that are affected and we're working as hard as we can to get water back to them as soon as possible," Mr Kaiser said.
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Thousands of homes in Newcastle's western suburbs are without water due to a damaged water main.
Workers digging near the Bunnings outlet on Minmi Road accidentally hit the main water supply line to Fletcher, Maryland, Minmi and Black Hill.
Hunter Water crews are trying to fix the problem but it's not clear yet how long it will take.