People living near Ohakea and Woodbourne defence bases are being told not to drink their tap water for at least a month while the supply is tested for contamination.
The need for testing around the bases was made public today by Environment Minister David Parker.
Two compounds, PFOS and PFOA - which were historically used to fight and train for flammable liquid fires but can no longer be imported or manufactured here - were found at above-guideline levels at the sites.
One hundred and fifty buildings near the airbases may have been contaminated, but only those that get their drinking water from bores, the Environment Ministry said.
Manawatu District Council said the water on Ohakea airbase was not affected, and that it believed water in nearby Sanson and Bulls was safe.
RNZ has spoken to four Ohakea farmers this afternoon who get their water from bores.
None of them had received letters from the ministry, or knew about the potential water contamination.
The Defence Force first did tests and detected the chemicals in April 2015, the Environment Ministry said.
But it wasn't until April this year, when the Australian Health Department issued drinking water standards, that the results of defence tests were found to be above the safety guidelines, the ministry said.
Mr Parker said he learnt about the potential contamination since becoming minister and National's Defence Minister and the Defence Force knew about it.
He said he was not sure what triggered the concerns in New Zealand but believed the Defence Ministry had been looking at it "for some time".
"I have seen papers that would suggest they have known longer than I have but I don't want to speculate on that at this stage."
"So did the prior government, at the end of their term."
Former National Party Defence Minister Mark Mitchell said he was given a verbal briefing by the Defence Ministry in August, and was satisfied the ministry was doing what it needed to.
The Defence Ministry has yet to respond to questions.
Mr Parker said there has been a similar situation in Australia, and work has been done on the risk posed by the compounds.
"That [work] suggests there's got to be long-term exposure for there to be any risk and we've got no evidence that the levels that are in water in New Zealand are at that problematic level."
Mr Parker said the greatest risk was where the foam was used very regularly for training.
"It doesn't appear that anywhere in New Zealand has been using this foam as often as was used at the larger military bases that they have in Australia."
While testing would be conducted at properties around both airbases, Mr Parker said there was a greater risk in the Ohakea area, near Palmerston North.
"It looks like the Ohakea Base is the only place where it has a possible effect on the water that's been used for drinking ... purposes."
He said he was not worried about any legal liability for the government, and that checking the water to make sure it was safe was a priority.
"If people are worried in the meantime then I think they're being offered bottled water."
Officials were knocking on the doors of the potentially affected households and they have been sent letters advising residents to use bottled water for drinking, cooking and brushing teeth.
The potentially contaminated water is safe for showering, the Environment Ministry said.
It said it expected it would take several weeks to contact property owners and conduct testing, with results expected around mid-January.
It said the results would be provided to affected landowners and statutory agencies working on the issue.
But the ministry said it would treat that information as confidential and would not disclose it unless required to by law.
Mr Parker said he saw no reason not to release the results.
"You would obviously want to consult with the people who are most affected first but I've got no desire to suppress that information."
The foam was in regular use until about 2005, after which it was gradually phased out.