The plant will replace the existing water treatment plant on the island, and will supply around 1,000 people.
The project also includes the building of a new pumping station next to the existing one, and construction of a new 700-metre water main through rural land to the new plant.
Planning permission for all work has been granted by the council, and the essential work will take around 10 months in total.
Scottish Water senior project manager David Kitching said: “The nano-filtration membrane plant is the most up-to-date technology which provides a high level of filtration, treatment and control to the water.
“This modern treatment works is the best in class and comes after an exhaustive design and planning process. It will give new levels of quality and resilience of supply for the people it serves and will secure the quality of water supply in the area for the next 20 or 30 years at least.”
The work will be carried out by Scottish Water contractor Ross-shire Engineering.