In the capital Vientiane a friendly battle ensues between families and friends in slow moving pick-up trucks loaded with barrels of water and groups lining the streets armed with hoses and water pistols, who compete to drench each other from head to toe.
The religious aspect of the festival is the washing away of wrongdoing and bad luck from the previous year to start the new year afresh.
Homes, temples and Buddha images are washed with water filled with petals before laypeople and novices respectfully tip the scented water over monks to make merit and bless them for the coming year. On riverbanks and in temples the faithful also build decorative stupas out of sand as another form of making merit.
Lao President Choummaly Sayasone reflected in his new year message to the nation this week that Laos has made "satisfactory achievements in implementing a foreign policy of peace, independence, friendship and cooperation."
"This has actively contributed to the common cause of nations for peace and cooperation for development, thereby raising the country's reputation and influence on regional and international stages," said the message, issued on Tuesday.
"We welcome Pi Mai Lao amid favorable conditions and good momentum for implementing the directives and tasks laid out by the Party and state," said Choummaly.
The festivities in Vientiane include live music stages and foam parties sponsored by the country's beer brands, as well as street stalls and games, while the UNESCO-listed heritage town of Luang Prabang in the north of Laos holds an annual beauty pageant and colorful processions joined by monks from the town's many temples.
A main road in Vientiane is being closed during the festival in an effort to reduce road accidents. Despite the generally low speed of traffic during the celebrations, driving over Pi Mai Lao is risky as roads, cars and motorcyclists are often drenched with water.
Also, disregarding annual pleas from police, a large number of people drive under the influence of alcohol during the celebrations leading to many accidents each year, some fatal.
This Lao New Year, Thursday marks the close of the outgoing Year of the Tiger, Friday is a limbo day between the two years, and Saturday is the first day of the new Year of the Rabbit, which, it is hoped, will bring peace and stability to the world in troubled times.
The Buddhist new year and accompanying water festival are also celebrated in neighboring Thailand, Myanmar, Cambodia and parts of Yunnan province, southern China.
