The water company said it is working to fix the problem as soon as possible and estimates repairs may be completed by 4 p.m.
The loss of supply is confined to the BT47 post code areas of the Waterside.
Meanwhile, NI Water is currently carrying out maintenance work that may affect householders in Claudy, Dungiven, Donemana, Feeny, Derry, Park, Strabane and Limavady.
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These works are expected to be completed by 1 p.m.