Hepatitis A has been diagnosed in three children from two families associated with Edna McCulloch Kindergarten in Oamaru, and it's not clear where the infection originated.
A programme of blood testing and vaccination will take place next week, says Public Health South, who are investigating.
"I have advised the kindergarten to continue to operate normally during our investigation," says Dr Keith Reid, the Southern DHB's medical officer of health.
Hepatitis A is a viral illness that is not common in New Zealand.
The virus is acquired by eating or drinking food or water which is contaminated with the virus.
The infection can also be spread by close contact with an infected person.
No other educational facilities are involved.
The best way to prevent the spread of hepatitis A is through good hand hygiene, including washing hands before and after preparing food and after going to the toilet.
In young children, the infection can occur with no outward signs of infection and may be passed on silently. In older adults or those with underlying health conditions the disease can be serious.
The illness occurs between 15 to 50 days after exposure to the virus.