He is thought to have removed his harness and threatened to jump from the 192m-high outer rim.
He alternately paced, swung his legs over the edge and shouted at those below.
Many gasped audibly when the man repeatedly crossed the spans between the outer 1.2m wide rim and the tower.
His actions added to a surreal scene punctuated by the laughter of bar patrons enjoying a warm summer evening and young girls squealing with delight as they were tossed into the air on a nearby bungy ride.
Wiltshire Apartment resident Kai Hau joined those waiting on Victoria St, which was closed between Albert and Hobson Sts for the duration of the incident.
He couldn't reach his apartment, but - like many others - couldn't help but watch the man.
"I don't think anyone would want to see the worst."
Dutch tourist Marija Westra was inside the tower when the drama began and was told by staff she could not go to the top viewing area because of a "medical problem".
She went to the viewing area just below but was evacuated about half an hour later, along with those in the tower's revolving restaurant. The casino remained open.
Westra and others were taken out of the complex through a rear entrance, she said.
The man's actions disrupted central city services. Several streets were cordoned off, buses were diverted and shops emptied.
When the man finally went back into the tower there was spontaneous applause from crowds watching from below.
John Hall, 22, from West Harbour, Auckland, watched the drama unfold for two hours.
"Thank God it is over," he said, as police reopened the road. "I was there for a while but I couldn't have watched if the guy had actually jumped."
Another onlooker, Angela Lamont, 35, from Balmoral, Auckland, said: "I'm glad it finished the way it did. The man must be pretty ill."
A police officer at the scene said the man had "gone AWOL" from a mental health unit in Hamilton.
As well as three police negotiators, the man had asked to speak to a member of the Jehovah's Witnesses and a Catholic priest.
His Auckland-based wife had also been taken to the top of the tower to speak to the man, the police officer said.
SkyCity refused comment initially but late last night said it had worked with police throughout the incident.
cherie.howie@hos.co.nz