The first six-month phase of the scheme at Sanday involves the complete refurbishment of the settling tanks and filtration system at the water treatment works.
The second phase will focus on upgrading the system control facilities at the site and is expected to begin towards the end of this year.
Clive Duncan, of Scottish Water, said: "This investment will see a wide-ranging upgrade carried out at the Sanday Water Treatment Works, which will ensure customers in the area continue to receive high quality, great tasting water well into the future.
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"Scottish Water is committed to delivering reliable, resilient and sustainable water and waste water services. This ambition is the cornerstone of our ongoing Shaping the Future Consultation, which is currently seeking views on our plans to continue serving communities the length and breadth of Scotland while keeping customer prices low."
ESD project manager Hugh MacPherson said: "The first phase of the project is focused on refurbishing some of the key infrastructure at the site, while the second phase will look at modernising the existing system control facilities.
"Customers should not be affected by any of the planned work, although they may notice a small amount of additional traffic travelling to the site and we apologise if this causes any inconvenience for road users."
(LM/MH)
