A suspicious package which sparked a bomb scare in central Dunedin has been destroyed in a controlled explosion.

A muffled boom could be heard across the central city as a robot operated by the army bomb squad destroyed the package about 5.10pm.

Army bomb experts from the Christchurch based Explosive Ordnance Disposal Squad were flown south after the suspicious package sparked a bomb scare and evacuations in Moray Place, central Dunedin.

A large section of central Dunedin was cordoned off around the site of the explosion at a commercial premises at the intersection of Moray Place and Great King Street.

Otago-Coastal area commander Inspector Jason Guthrie said about 12.40pm a member of the public found a silver foil-lined package and a note taped to an vacant building in Moray Pl.

The package was visible from the street. It was small, with the note over the top.

Police said when the Explosive Ordnanace Disposal Squad detonated the package it was found to be inert.

The cordons were lifted about 6.15pm.

Up to 20 staff were involved in the evacuation operation, and five buildings had been evacuated.

A welfare centre was set up at the Glenroy Auditorium on Harrop St for anyone stranded as a result of evacuation.

People in neighbouring buildings were evacuated amid a heavy police presence.

"The police came into the building and said 'Police are here, everyone leave'," an office worker told the Otago Daily Times.

Community house stand in manager Rob Tigeir said police told staff they had to evacuate because of a bomb threat.

"Police were really clear and said the office would be shut for hours", Mr Tigeir said.

Countdown supermarket was also evacuated, however reopened about 6.15pm.

Police have been helping those with vehicles trapped inside the cordon by taking their keys and driving the cars out.

Police said members of the public should avoid the area.

The cordon extends to Great King and St Andrew Sts in the north, Moray Pl and Stuart St in the south and Bath and George Sts in the west.