It was found in trees in the Mission Bay Reserve at 7am.
Tamaki Drive was closed and the area was cordoned off while the device was detonated. The road reopened at 10.20am.
Police said a small area behind the police base was still cordoned off as the immediate scene was examined.
Dylan Barrett, manager at KiwiYo Mission Bay, said police had told businesses to get everyone inside and lock the doors.
"Police have cordoned off the road ... They're patrolling the road currently," he said.
No customers were affected at KiwiYo, he said, but it would mean a loss of business while the frozen yoghurt store remained closed.
The discovery of a suspicious package was worrying, he said.
"It's a bit of worry, considering I'm the only one here."
Tom Mabon and Tom Robinson, who watched from the Coffee Club across the road from the reserve, said the detonation "sounded like a crisp packet".
"It sounded like a non-event to be honest," Mr Robinson said.
People at the cafe were allowed to stay at tables on the footpath while the device wad blown up.
Traffic was being diverted around the Mission Bay shops but traffic is light and there are no queues.
Starbucks manager Pallavi Jadhav said police had told her to make sure all staff and customers were inside.
"We have a few customers. They're fine, all chilled about it, they're not panicking or anything," she said.
They had not heard any bang or noise that would indicate a device had been detonated, Ms Jadhav said.
"It's just a normal day with some cop cars around," she said.
She added: "I've never witnessed anything like this, but I don't think anything serious is there."
NZME's Dean Buchanan was earlier diverted away from the area by police.
He says there seemed to be a fair-sized police presence with two cars at end of the reserve redirecting traffic.
He saw policemen "running around", but couldn't get any information on what was happening.
Buchanan said wasn't possible to get into Mission Bay at the time.
