Formal plans for a £125 million second reservoir at Cheddar – the first of its kind in England for a generation – have been submitted to Sedgemoor District Council.
If approved by both planning and regulatory authorities, the Bristol Water project will see a 9,400 million litre reservoir built close to its existing counterpart.
A decision on the planning application is expected in spring next year.
The new reservoir could be fully operational by 2025, filled by surplus winter water flows in Cheddar Gorge.
Bristol Water says that extensive analysis and planning has demonstrated that the new reservoir is needed to meet growing demand for water.
The proposed site was chosen as a preferred solution following extensive and detailed technical studies and stakeholder consultation on possible options, with an initial list of 53 possible sites being whittled down to one.
"Cheddar Reservoir Two offers the most cost effective solution that is deliverable in terms of environmental and geological considerations," said project spokesman Jeremy Williams.
"We believe that, apart from providing vitally needed water supplies, it will also offer major recreational and conservation benefits."
The company has staged two phases of public consultation this year.
Around 800 people attended six public exhibitions, and more than 280 feedback forms were received.
"The whole consultation process has been very positive and constructive, with a majority more than satisfied with our proposals," said Mr Williams.
The company has promised to pay close attention to construction traffic.
It will plan when vehicles can move and will work to minimise their impact on road surfaces.
A public consultation into the scheme found that traffic was the biggest concern, followed by the impact on nature and farmland.
Bristol Water supplies more than one million people with water in a 2,400 square kilometre area stretching from Tetbury in the north, to Burnham in the south and east to Wells and Shepton Mallet.
It is committed to building the new reservoir without causing any lasting adverse impact on its existing Site of Special Scientific Interest (SSSI) at Cheddar and says it will ensure that the new reservoir becomes even more important for biodiversity than the existing one.
The new reservoir will also become an SSSI.
The existing reservoir is an important site for wildfowl, including over-wintering diving ducks, coots and grebes.
It has one of the largest flocks of wintering pochard in England Wales, and is regionally important for gadwall, goldeneye and great crested grebe.
It also provides food for up to 2.500 wintering coots, the largest flock in Somerset.