The Water Canary checks supplies in real-time, alerting users to possible infections.
It is also able to upload the data, allowing scientists to monitor the location and movement of outbreaks.
Unveiling the device at the TED Global conference in Edinburgh, researchers said they hoped eventually to give the units away for free.
More than three million people die each year from water-related disease, according to the World Health Organisation.
"Water Canary is an open source tool to rapidly test water and transmit information in real time to be instantly assessed," said co-founder and TED fellow Sonaar Luthra.
He explained why such a device is needed.
"Currently water testing is too slow and too expensive. We only test water in hindsight," he told the BBC.
"When cholera hit Haiti there was no way of knowing how fast it would spread," he added.