St Mary's could run out of ground water if significant steps aren't taken to reduce water usage.
The problem could become so bad the council could even be forced to ship water to the islands, rationing it per person each day.
It could also dramatically hinder fire crews' attempts to extinguish blazes as they rely on drinking water to douse flames.
As the extreme dry period is set to continue, the council is now urging residents to make changes before it's too late.
Most of the island's water comes from the ground, but tests indicate supplies are at an historic low, and is being extracted at an unsustainable rate.
The council of the Isles of Scilly now says it is unable to meet water demands without seriously damaging wells and boreholes.
The low pressure in the groundwater could result in seawater contaminating the wells, causing the source to be unusable for a generation.
The Council has emergency plans in place should the islands run out of water. This would involve shipping water to the islands with a ration per person each day.
The council is asking all of its customers to cease any use of hosepipes, sprinklers and paddling pools and to keep other water usage to an absolute minimum.
They are reminding people to still stay hydrated and not reduce their consumption of drinking water, but to instead cut down in other areas.
If there is a leak it must be reported as a single dripping tap can waste over 5,000 litres of water a year and could fill a paddling pool every week.
When crews attend a fire on St Mary’s, they are reliant on drinking water to put out the blaze. As there are no reservoirs on the island, a single fire can greatly diminish the daily supply of water.
They are reminding people:
Do not light a bonfire for any reason.
Do not use fire as part of any farming activities.
If you are having a barbecue, take all possible measures to ensure you do not cause a fire.