The company spent Wednesday night looking into the issue after customers reported concerns about the mains water.
Scottish Water was delivering bottled water and notices, advising people not to use the water, to households and businesses in the area.
Customers have been asked not to use boiled tap water, and to use their water only for flushing toilets until further notice.
A Scottish Water spokesman said: “After receiving contacts from customers about the taste and smell of tap water, we investigated thoroughly and examined our network.
“We have advised customers in Carfin, Newarthill, Chapelhall, New Stevenston and Dalziel Park not to use their water for any purpose – other than flushing toilets – as a precautionary measure.
“We apologise for the inconvenience this has caused and we have been distributing bottled water to affected properties during the night.
“We have had teams out in the affected areas all night assisting customers and are investigating the issue as a matter of priority.
“We will issue further updates when more information becomes available, and we will closely monitor the network and advise when the water is back to normal.”
Scottish Water said it will ensure that assistance is provided to customers who require additional support, such as the elderly, disabled, hospitals and care homes, as well as the wider community.
Scottish Water chief operating officer Peter Farrer said investigations were under way.
He said: “We’ve been advised of an oily based substance. This has got a strong odour to it so most customers are not drinking it because they can detect an odour from it.”
He said 100 people had worked through the night delivering bottled water, reaching 3,000 to 4,000 properties by around 7am yesterday.
The nine schools closed in North Lanarkshire were Taylor High School, St Theresa’s Primary, Brannock High School, Keir Hardie Memorial Primary, Our Lady & St Frances Primary, New Stevenston Primary, St Patrick’s Primary, Chapelhall Primary and St Aloysius Primary.
In a statement issued later by Scottish Water, Mr Farrer said: “We apologise for the inconvenience this has caused and we have been distributing bottled water to affected properties.
“Bottled water has now been made available at two collection points and we have had teams out in the affected areas since last night assisting customers, with around 100 staff working throughout the night.
“Initial investigations suggest an oily substance is in the network. We are continuing to carry out sampling and investigations on the network as part of these ongoing investigations – and these will continue as a matter of priority to confirm the cause and resolve the issue.”