Jari Hiltula, the top environmental official in Ostersund, in northern Sweden, confirmed that cryptosporidium had been found, the TT news agency reported Monday.
The source of the contamination is unknown.
"We've found the haystack, now we're working furiously to find the needle," Hiltula said.
It is feared 3,000 to 9,000 people may be infected.
A warning to boil tap water was issued Friday and renewed Monday.
The city posted a survey on its Web site to gain information from the public. It drew more than 1,000 responses within 24 hours.
Several members of Sweden's biathlon team, training in Ostersund for an international competition in the city, have come down with symptoms.
"I was sick last weekend. I was fatigued, had a fever, diarrhea and a stomach ache," Helena Ekholm told TT.
All but two members of the women's team are ill, with the two healthy ones having trained elsewhere.
Cryptosporidium's symptoms can last for two weeks.