A Queensland island could have just 150 days' worth of water left, leaving thousands of residents facing evacuation if a solution to the crisis can't be found.

Palm Island is an Indigenous community of up to 4000 people with an idyllic location on the Great Barrier Reef, 65km northwest of Townsville.

But with water levels precariously low, visitors have been told to stay away and the local council is furiously trying to come up with an action plan should the town's two dams dry up completely.

Adding to the community's water woes was a sudden plummet in the quality of the town's water supply earlier this month, which residents claim forced them to bathe in filthy water that made them sick.

The island's mayor, Alf Lacey, told ninemsn the town had about 150-180 days of water left.

Mr Lacey said the island's water supply had only dipped lower once before, in 1992, when many of the town's women and children had to be evacuated to the mainland for eight months.

"It was very critical back then," Mr Lacey said.

"It got to a crisis situation where families were moved off the island and settled on the mainland for a certain period of time.

"Some of those families stayed there and still live there. We don’t want a repeat of that."

Mr Lacey said he met with Queensland Premier Annastacia Palaszczuk last Friday to voice his fears about the looming water shortage.

Officers from the Department of Energy and Water Supply assessed the situation on Palm Island yesterday.

A mobile desalination plant or reconnecting an old disused weir at Bamboo Creek were emerging as two possible solutions to the problem, he said.

In the meantime, council plumbers have been fixing leaks to avoid any water wastage and erected signs reminding residents of water restrictions.

The town's filtration system was also cleaned last week after residents complained about the water turning dark and murky, Mr Lacey said.

Lynndel Prior said she and her family were forced to bathe in contaminated water after the sudden downturn in water quality a fortnight ago.

Pictures Ms Prior posted on Facebook show a bathtub filled with dark yellow, dirty-looking water.

"The water was really dark and dirty and my three youngest children, aged two, three, and eight years old all became sick with diarrhoea, upset tummies and boils," Ms Prior said.

"One of the doctors at the hospital made mention that you would be surprised about the amount of people coming in with children with the same symptoms," she said.

Ms Prior also claims a boil developed on her own arm after showering in the affected water.

Ms Prior said the water quality had improved somewhat in the last week after the local council had taken action but it remained slightly discoloured.

She said her family bought a water filter to avoid having to boil all their water.

Townsville Hospital and Health Service chief executive Julia Squire said the island's hospital, The Joyce Palmer Health Service, had not reported any increase in presentations of children with illnesses relating to the water.

Mr Lacey said he was confident the water was now drinkable.

"Our workforce has gone around and flushed a lot of the main lines in town and that has fixed the situation in terms of the fit for human consumption," he said.

"We're tracking pretty good there at the moment and we're testing the water weekly in the laboratory."

As well as the water quality issues, Ms Prior said she was frustrated the council had not put in place water restrictions earlier and was concerned residents would be evacuated if the island ran dry.

"To move my family now at this time with school it would not be a good thing for all our children," she said.

"Especially not with end of the year coming up. And I have work full time so what does that mean, do I stay behind and do my children go without me?"

"We don't want to go down that road as a family until we have to."

A boil Ms Prior claims developed on her arm as a result of bathing in the contaminated water. (Facebook)

Ms Prior says water quality has improved, but compared to filtered water in this photo it still has a long way to go. (Facebook)