The Arade dam is 31 miles (50km) from where the British toddler went missing in Praia da Luz 16 years ago.
The operation is being led by German police looking for evidence to link her disappearance to Christian Brueckner.
The 45-year-old German national was made a formal suspect, or an "arguido", by Portuguese prosecutors in 2022.
Brueckner is known to have visited the picturesque spot around the time Madeleine, now 20, went missing.
Since early on Tuesday, police teams have set up tents around the dam.
Officers from Portugal, Germany and the UK have been holding morning briefings, as divers gather nearby. On the beach, a boat is ready to take people out into the reservoir.
A short statement from the prosecutor's office in the German city of Braunschweig confirmed the search on Tuesday morning but did not say why it was taking place.
It is not the first time the reservoir has been searched as part of the investigation.
In 2008, Portuguese lawyer Marcos Aragao Correia paid specialist divers to check the waterway after an apparent tip-off from criminal contacts that Madeleine's body was in the water.
Madeleine, from Rothley, Leicestershire, was three years old when she went missing on 3 May 2007 while on holiday with her family in the Algarve resort of Praia da Luz.
Her parents, Kate and Gerry, had gone for dinner with a group of friends at a resort restaurant, leaving Madeleine and her younger brother and sister sleeping in their apartment 100 yards away.
The adults had devised a rota to check on all of the group's children during the evening. But when it was Kate's turn, she discovered Madeleine had gone.
Hans Christian Wolters, German state prosecutor in Braunschweig, is treating Brueckner as the main suspect in the McCann case, although he has never been charged over Madeleine's disappearance and has denied any involvement.
The state prosecutor said a growing amount of evidence had connected Brueckner to the case, including his mobile phone records showing he was in the Praia de Luz area at the time of Madeleine's disappearance.
Brueckner is currently in prison in Germany for the rape of a 72-year-old woman in 2005 in the same area where Madeleine went missing.
He was living near the Praia da Luz resort when the McCann family was on holiday, and spent time in the area between 2000 and 2017.
The most recent search in Portugal in relation to Madeleine's disappearance was in 2014, when British police were given permission to examine scrubland near where she vanished.