The incident, which resulted in a 59-year-old arrested by armed gardaí, occurred in Clarecastle, Co Clare, at 9.20am yesterday.
It is understood tempers became frayed when workers contracted by Irish Water arrived to install meters.
Despite a separate confrontation with people from the area earlier this week, the installers had managed to put in the majority of the meters by Thursday.
However, on returning to finish the task yesterday they found a car parked over the hole where the final two meters were to be placed.
The workers were then confronted by a man brandishing a rifle, who ordered them to leave. While initial reports said the man pulled the trigger twice without shots being fired, gardaí said they now believe this was not the case.
The workers immediately retreated, before calling gardaí, who sent armed detectives to the scene.
Gardaí later arrested a 59-year-old man after Clare Civil Defence located the rifle allegedly used in the incident in the nearby River Fergus. He was questioned under Section 30 of the Offences Against the State Act but was released at 7pm. A file will be sent to the DPP.
A worker involved said: “A man came out of the house with a rifle so we just dropped everything. If a person tells me he doesn’t want me to dig a hole and install a meter, I’ll just walk away.”
Meanwhile, Siptu has confirmed it will work with groups “including those involved in Right2Water” to campaign against the current Irish Water plans.
The union represents one in four Irish Water workers and wants to stop them from losing bonuses.
While it does not agree with Right2Water on the need to abolish the company completely, a Siptu spokesman said it wants water charges to only be linked to “non-essential use”. He said the union also wants a referendum to ensure Irish Water does not “drift” into privatisation.