World War II ammunition collected by a man at a Port Stephens beach has exploded and inflicted injuries on him and his four-year-old daughter.

The 37-year-old man was fossicking on Birubi Beach when he found the old artillery shells and decided to take them home.

Bomb disposal experts and fire crews were called to Morna Point Road at Anna Bay just before 10:00pm yesterday after the ordnance exploded at the man's home.

He and his daughter suffered shrapnel injuries which are non-life threatening.

The man was playing with the old ammunition he found, police said. ( ABC News )

Port Stephens police Inspector Alan Janson said Birubi Beach is a former WWII weapons training range and shells are sometimes found.

"He's found some unexploded ordnance and taken that home and played with it," Inspector Janson said.

"Unfortunately one of those items has detonated, injuring himself and the four-year-old girl.

"They were very lucky they didn't have more life-threatening injuries.

A four-year-old girl suffered non-life-threatening shrapnel injuries, and was taken to Newcastle's John Hunter Hospital. ( ABC News: Carey Harris )

"Any military ordnance you may find, it is dangerous, you're best not to touch it, play with it, you don't take it home.

"Call your local police or military establishment and report it immediately."

They were treated at the scene by paramedics before being taken to Newcastle's John Hunter Hospital in a serious but stable condition.

An exclusion zone was set up by emergency services at the site and police established a crime scene.

Police worked with personnel from the Australian Defence Force and a number of items were removed from the house.

Inquiries into the incident are continuing.