Water chiefs said misconceptions that pipe work in west Belfast is linked to forthcoming water charges are putting workers at risk.
Some staff have been warned they would be "blown up" if they returned.
NI Water have condemned the threat to their contractors who were told to get out of Glen Crescent in the Glen Road area on Tuesday.
An SDLP councillor said the threat was delivered by masked men.
A NI Water spokesman said: "Any misconception or misreporting that our work is linked to forthcoming water charges puts our workers and their equipment at risk of serious harm."
NI Water said contractors who were undertaking work as part of the £10 million upgrade of watermains across north and west Belfast were approached and directed to leave the site, claiming if they returned on Wednesday morning, they would be blown up.
The spokesman added: "In the interests of health and safety NI Water has been forced to withdraw its contractors from the area following this serious threat."
Police are investigating.