Construction of the Sh20 billion Thiba Dam meant to boost rice production in Kirinyaga County has stalled due to a financial crisis.
Contractor Strabag Company's workers have been dismissed and it is feared that the project may be terminated.
The workers the Nation spoke to said they were sent packing because the government had not released money to the company.
"We have been told to go home until further notice because the company has no money to pay us and finance the project," one worker said.
Contacted, Central Regional Commissioner Wilfred Nyagwanga confirmed that the project had been suspended.
"It is true the construction has temporarily been suspended due to problem of resources," Mr Nyagwanga said without elaborating.
He said the national government project implementation team in the region had written to the officials in Nairobi to sort out the issues.
"Once the problems are resolved, the project will possibly resume next week. We are taking the matter seriously," he added.
He emphasised that the government is committed to ensuring the project is completed to enhance food security.
Strabag personnel officer Simon Kiragu declined to speak to reporters, citing the sensitivity of the matter.
Strabag engineer James Karanja said he was busy. He promised to call later but had not by last evening.
The project was officially launched on November 23, 2017 by President Uhuru Kenyatta.
At the launch of the project meant to double rice production in the giant Mwea Irrigation Scheme, the President directed that the work be completed within the stipulated time.
Kenya produces 100,000 tonnes of rice annually, which is not enough to meet local demand.
Local leaders warned that if urgent measures were not taken, the dam will go the Kimwarer way.
When Deputy President William Ruto visited the region recently, he revealed that 50 per cent of the project had been completed and told the residents to be patient.