The burst occurred at around 10.30am at a construction site along Shau Kei Wan Road.
Speaking to reporters, Chief Engineer of Hong Kong and Islands Region Lin Tang-tai said the department aimed to resume water supply by midnight.
He said the pipe concerned, with a diametre of 18 inches, had been in use for more than three decades.
But the incident was not caused by aging, instead it was due to external forces, he said, with the crack measuring over one metre.
“The scope of the impact involved in the incident covered Shau Kei Wan and parts of Sai Wan Ho. The number of households involved exceeds 10,000,” he said.
“We will deploy more than 10 water trucks, 100 water tanks and tens of thousands of bottled water, as well as various supporting facilities, to provide temporary fresh water supplies for residents affected.”
The Highways Department, for its part, apologised for the inconvenience caused.
Chief Highway Engineer Alan Chan said contractors had already carried out an inspection ahead of the construction work, adding that his department would look into the cause of the incident and see if the contractors are liable.
Police said a care home resident in her 80s was hospitalised after she sustained injuries to her limbs due to the incident.