Uisce Éireann has also announced it intends to lift the Boil Water Notice as soon as possible.
The project, being carried out in partnership with Galway County Council, involves the replacement of 1.8km of cast iron water mains with new pipework.
Uisce Éireann's Eoin Hughes explained that as sections of the existing cast iron network are replaced, Uisce Éireann and Galway County Council will be in a position to consult with the HSE with a view to lifting the Boil Water Notice in sections.
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He said: "The works, which have commenced on Cross Street and will be carried out in phases, are a critical step in safeguarding the water supply to homes and businesses in Loughrea ensuring a safer, more sustainable water supply.
"We acknowledge the inconvenience that customers on this supply are experiencing and would like to reassure them that we are working as quickly and as efficiently as possible to complete this vital programme of works for the town and provide them with a safe and secure water supply for generations to come."
Uisce Éireann has prioritised the works under its National Leakage Reduction Programme which helps provide a more reliable water supply to communities by reducing high levels of leakage and improving water quality.
The work is expected to be complete in 2024.
