Bristol Water said cryptosporidium was found at Clevedon works, which had since been taken out of operation.
The company said it was supplying bottled water to vulnerable customers.
Schools are being contacted directly and notices are being delivered by hand to affected properties.
Automatic compensation Bristol Water said the boil notice was likely to remain in place for at least 48 hours but customers would be informed directly when the notice was removed.
People have been advised not to eat food prepared using the tap water after Wednesday night and to avoid swimming for a few days.
Compensation of £10 will automatically be paid to affected customers, the company said in a statement.
Thara Raj, a health protection consultant for Public Health England South West, said: "We would remind people in the affected areas to follow the advice from Bristol Water and boil their drinking water and allow it to cool before use.
"The levels of cryptosporidium detected in the water supply is low and the advice to boil the water is a precaution.
"If people feel unwell or experience symptoms of diarrhoea and vomiting they should contact NHS 111.
If your symptoms become severe, you should contact your GP."