The warning, issued just before midnight AEDT, said that the carcase was found in Shoreham Reservoir yesterday during a maintenance inspection.
Water testing and investigations are underway, but mean residents at Flinders, Point Leo, and Shoreham, are urged to boil their tap water before consuming it.
The same advice applies for drinking water for livestock and pets.
“E coli itself is not necessarily harmful, but finding it means that the drinking water may be contaminated with other germs that can cause illness,” the warning read.
“Low water pressure and interruptions to water supply can lead to a build-up of bacteria that can make people sick.
“Consumption of unboiled water may lead to diarrhoea, cramps, headaches or other gastro-like symptoms.
“Infants, children, pregnant women, the elderly and immuno-compromised people are particularly at risk.”
Bottled water is also safe to drink.
As well as drinking, boiled and bottled water should be used for food preparation, cleaning fruit and vegetables, making ice, preparing baby formula, and brushing teeth.
Drinking water can be found at Flinders Civic Hall, 54 Cook Street, Flinders, and at Shoreham Recreation, Reserve Cliff Road, Shoreham.
Stocks are expected to be affected by the ongoing situation.
The next warning is expected at 5pm AEDT today, or earlier should the situation change.