Wellington City Council has green lit $2 million of extra funding to fix 880 leaky pipes over summer and autumn.
In November, Wellington Water briefed city councillors to indicate it had extra capacity to fix the infrastructure.
However, to do the work the water provider would need more money added to its annual budget.
The council agreed to an amendment that supplies an additional $1m in funding if Wellington Water is able to provide assurances that ratepayer money is being used wisely.
It requires Wellington Water to provide reporting data on the work, including details like address of leak, date reported and the date it was fixed.
Council officers would be authorised to release a further $1m in operational funding for leak repair to the water provider if, by 15 March, the initial $1m has been fully utilised and Wellington Water has provided the reports as signalled in Thursday's decision.
The extra funding will be sourced from borrowings.
Mayor Tory Whanau said they knew many Wellingtonians would be concerned about the potential water shortages heading into summer.
"This extra funding will help deal with that problem. With 45 percent of the water in the region - 41 percent in Wellington City - being lost to leaks we need to fix as many leaks as possible."
But Whanau said as a council they needed to make sure they delivered value for money for ratepayers.
"This is why the amendment seeks to ensure that WWL [Wellington Water] can provide us with details as to how and where the extra funding is spent."
The extra funding will be sourced from borrowings.
It follows recent reporting that Wellington Water is working with emergency agencies to deal with potentially critically low water levels this summer.
The capital is currently under level 1 water restrictions, meaning households can only use sprinklers every second day.
But, due to warmer weather and leaky pipe infrastructure, the water provider is preparing for level 4 restrictions - that would see all outdoor residential use for water banned.
Wellington Water has also recently advised the region's councils they would need $30 billion over 30 years to deliver their recommended programme of work.