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Police were called to Riselaw Rd, Calton Hill at 5pm yesterday in response to a neighbourhood feud, Senior Sergeant Anthony Bond, of Dunedin, said.
The dispute erupted when a 51-year-old man went to his neighbour's home and allegedly smashed her front window.
While the 38-year-old woman checked the damage, the man went around the back of her house and smashed another window.
While recording on her phone, the woman then allegedly confronted her neighbour with a knife.
When police arrived, both neighbours were arrested and would appear in court at a later date.
The feud between the pair was long running and had been going on for at least a year, Snr Sgt Bond said.
They were both released on bail with the condition that they stay away from one another.