Zanzibar's water department said pumping at the island's two main reservoirs has dropped from 14 million litres a day to four million owing to a shortage of rain.
Hemed Salim, the department's head, said: "The only option is to start rationing the little water we get. This is the only immediate solution to help people to get little water in Zanzibar Town."
Of the island's population of about one million people, 350,000 live in Stone Town, the historic centre of Zanzibar and the densely-populated capital, would be affected by the rationing.
Under normal circumstances, Stone Town's population requires about 50 million litres of water a day.
Despite being surrounded by the Indian Ocean, Zanzibar draws its water from natural springs and boreholes.
Apart from Tanzania, and Uganda, that are part of east Africa, the UN Food and Agriculture Organisation (FAO) on Friday warned that 11 million people in Somalia, Kenya, Djibouti and Ethiopia were on the brink of starvation in the Horn of Africa.