The article describes a study using discrete fibre optic sensing as a means of leak detection on water distribution pipes installed in unsaturated ground. A short length of pipe fitted with artificial leak points was installed, to which a fibre optic cable with fibre Bragg gratings was attached. An optical fibre with fibre Bragg gratings was also installed in the ground parallel to but separate from the pipe. Thermistors were installed at selected locations to measure temperature changes independent of strain. It was found that a simulated water leak resulted in clearly detectable temperature changes and thermally induced fibre Bragg grating wavelength changes in the ground around the pipe. However, significantly larger deformation-induced fibre Bragg grating wavelength changes were measured on the pipe walls and also in the initially unsaturated ground in response to leaks. A wetting front originating from a water leak propagating through unsaturated soil is associated with significant effective stress changes because the infiltrating water alters the ambient matric suction in the soil. This effective stress change is associated with significant ground deformation resulting in a fibre Bragg grating response which significantly exceeds the thermal response associated with (usually) colder water leaking into unsaturated soil. The study illustrates advantages of measuring ground deformation-induced fibre Bragg grating wavelength changes over pure temperature changes as an efficient means of leak detection in unsaturated ground. However, due to the limited number of fibre Bragg gratings that can be monitored along a single optical fibre, a leak detection system suitable for practical implementation should be based on distributed fibre optic strain sensing, an aspect requiring further research.