A grenade scare that shut down parts of the CBD in Griffith, in the New South Wales Riverina, has ended after explosives experts defused the device.

Police said an was found by council staff outside the Gemini Hotel on Banna Avenue in the heart of Griffith about 8:30am.

"This object was deemed to be a suspicious article and police were immediately notified," Inspector Kim Traynor from Griffith LAC said.

"Upon further inspection of the item it appears to be an old hand grenade."

Police have now revealed that the item was an "inert World War II grenade".

It is thought the grenade was being thrown out after family members cleaned up the house of an elderly relative, and fell out of a moving vehicle carrying rubbing on the way through town.

About 10 to 12 businesses, as well as the local council library, fell into the lockdown area and were evacuated.

A short time ago an Defence ordinance specialist unit from Canberra, more than 350 kilometres away, arrived and removed the grenade.

Police have now reopened the centre of the city.