The Department of the Environment has given the go-ahead to Ennis Town Council to tender for a new water treatment plant expected to cost €13 million.
The move follows a warning by the Health Service Executive and Ennis Town Council to the town's residents last week not to drink water without boiling it first.
The notice, which remains in place, was issued after traces of the bacteria E.coli were found in the supply.
The latest warning is the second time in three months that the authorities have advised householders not to drink the water.
In June they issued a "boil notice" after five pre-school children living in different parts of Ennis were diagnosed with Cryptosporidiosis, a disease with such symptoms as abdominal cramps, fatigue, nausea, vomiting and low-grade fever.
Minister of State for the Environment Batt O'Keeffe said yesterday that work should start on the new plant in July, and it would take at least 12 months.
He said approval has also been given for the construction of an Ennis water augmentation scheme.
Mayor of Ennis Frankie Neylon (Ind) yesterday welcomed the announcement.
Green Party councillor Brian Meaney said the Minister had responded to political pressure by coming to Ennis and making the announcement.
"But this plant should have been installed before now. We can't depend on Ennis's water supply because of the vulnerability of the source.
"I believe that the boil notice or some warning notice relating to the water supply should remain in place until the new plant is built.
"I know that is two years away, but this is an urgent health problem."
