Warning signs will soon be installed, advising that the popular lake is closed to all activity, including swimming, water sports, wading, fishing, extracting water for stock or domestic use. No stock or pets should be allowed to make contact with or drink the water.

The lake, which had been empty for many years due to the prolonged drought, had only recently reopened for boating.

Council will conduct daily visual inspections of the lake to observe any visible blooms, scum formation, evidence of dead fish and to check that warning signs remain in place.

Blue-green algae can cause taste and odour problems in water supplies. Some species of blue-green algae produce toxins that are harmful to humans and animals when they are consumed, inhaled or contact the skin.

A council spokeswoman said analysis of water samples from Lake Burrumbeet had revealed the presence of more than 50,000 cells per millilitre of microcystis species and 400 cells per millilitre of anabaena species.

The council has ordered further toxicity tests to determine whether the species present are producing toxins that may affect fish, animals and people. The toxicology results may take several days.

The council has contacted adjacent landowners in the Lake Burrumbeet area and will brief the managers of the Burrumbeet Caravan Park and advise the Burrumbeet Ski Boat Club and the Lake Burrumbeet Advisory Committee of the lake's immediate closure.

The Department of Health, the Department of Sustainability and Environment, Glenelg Hopkins Catchment Management Authority and Central Highlands Water have all been notified of the outbreak.

Blue-green algae is often caused when large amounts of nutrients (nitrogen and phosphorous) which have been building up on surrounding land during dry weather flow into a waterway during heavy rain.

Higher than normal temperatures and high pH levels in the water can also contribute to the problem. In dry periods low water-storage levels and low water inflows can also create similar problems.

Signs warning of the outbreak will be installed at boat ramps at the Lake Burrumbeet Caravan Park, Sawyers Bay and south shore, as well as at park entrances and track entrances off Bo Peep Road. Signs will be installed along the north-east shore near the recreation reserve and caravan park.