Nasty-smelling water won’t make you sick -- it is harmless. Sulfur and bacteria are present in nearly all the water that enters your home. The odor happens when the magnesium anode rod in your water heater tank reacts with the sulfur and bacteria in the water, creating hydrogen that then forms hydrogen sulfide. There are many ways to take care of this issue, from replacing the magnesium anode rod to purifying the water in your water heater.