The latest warning was issued following the discovery that micro-organisms causing nausea and severe diarrhoea had again infected the city's water supply.
Sydney residents are being told to boil tap-water for at least one minute before using it for drinking, cleaning teeth, gargling, washing uncooked foods or making ice.
The New South Wales health authorities have again advised school children to take bottled water to school.
The same organisms - giardia and cryptosporidium - caused the first contamination in July.
Then, the Australian Prime Minister, John Howard, described the infection as a national embarrassment in the run-up to the Olympic Games which will be held in Sydney in the year 2000.
'No need to panic'
Health authorities said the micro-organisms were found in water supplies across Sydney in the last few days, adding that recent heavy rain may have contributed to the water contamination.
"We don't know where the contamination is at the moment - we're looking for that," said New South Wales state Health Minister Andrew Refshauge.
"There is no need to panic but we can't be complacent," he said.
The cause of the first contamination has still not been determined, but at the time several dead dogs were found in a canal feeding water into a contaminated filtration plant in Sydney's far western suburbs.
The parasites occur in the gut of warm-bloodied animals and health authorities say the parasites could have flowed naturally into the water system from Sydney's rural hinterland.
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