ENVIRONMENTAL flows from Chaffey Dam near Tamworth will be stopped immediately and water will be kept in the dam for human needs.
The controversial releases meant 30 megalitres of water per week - the equivalent of 12 Olympic swimming pools - were being released from the dam, gushing down the Peel River.
Chaffey is Tamworth's main water supply and has hovered at around 13 to 14 per cent capacity in recent months.
That figure failed to rise despite significant rainfall, which triggered criticism from Tamworth Regional Council and Tamworth MP Kevin Anderson about the necessity of environmental releases.
On Wednesday morning, Mr Anderson announced the flows will stop immediately.
"This new arrangement ... is welcome news for the community who are frustrated with the current tight water restrictions," he said.
Mr Anderson said the temporary arrangement is a "common sense" approach and will provide better water security for the region.
"As part of the new arrangement, environmental flows from Chaffey Dam will cease immediately and the water allocated for the environment will be held back in the dam," he said.
"With critically low water storage in Chaffey Dam this strikes the right balance between critical human needs and the environment."
The breakthrough arrangement is set to last four months, and will be revised in October this year. It'll allow the impacts to be assessed, along with the operation of the new pipeline which is providing water directly from the dam to the city.
Mr Anderson said the emergency plan recognises the dire situation water users face in the Peel Valley.
The NSW Department of Planning, Industry and Environment will keep a close eye on the health of the Peel River.
The state government said it will monitor several deep pools along the river that are home to an array of aquatic wildlife like fish, frogs and platypus.
Water NSW previously said the hotly contested releases were originally imposed as a planning approval condition for the Dugowan weir, which was installed late last year.
Under the previous arrangement, environmental releases were only to be stopped when the dam plummeted to 10 per cent capacity.