The Lochmill Reservoir has been bought by the Newburgh Community Trust (NCT), which has been supported by the National Lottery backed Community Land Fund.
The NCT has become the first community owner of a reservoir under the right to buy initiative in Scotland and it plans to create an informal pathway around it.
Scottish Water’s water community team manager for Fife Steve Scott said: “While the reservoir is no longer used to supply the community, it is well loved by many locals who enjoy the peace and tranquillity it offers.”
He added: “We’re really pleased that we’ve reached an agreement for the Newburgh Community Trust to acquire the reservoir under right to buy legislation.
“Significantly, it’s the first initiative of its kind involving a Scottish Water reservoir. It means the local community will be able to enjoy the area around the reservoir for many years to come.”
NCT chairman Andrew Arbuckle said: “This is a wonderful day for the people of Newburgh and the surrounding area.
“Even after the old Burgh Council gave Lochmill to the local authority in the 1970s, many of the older generation believed it still belonged to the town. Now it certainly does.”
The 363,000 cubic metre reservoir was constructed in 1951 and was the area’s main drinking water source until it was decommissioned in 2007.