Heavy rain over the past two weeks has washed slips on to the Department of Conservation (Doc) track and caused slumping, making it dangerous.
The track has been used by 40,000 visitors since November, and is one of the most popular Doc tracks in North Otago.
It leads to a viewing platform and hide where people can watch the penguins returning to their nests.
A side track leading down to Bushy Beach has also been cut off by a large slip.
Doc rangers Helen Jones and Kevin Pearce yesterday assessed the state of the track after further slips during last weekend's heavy rain.
About three-quarters of the 400m-long track has been damaged.
Mr Pearce said the damage to the track was the worst he had seen in his 20 years with the department in North Otago.
They will now prepare costings and options to get the track reopened, which may not happen until August at the earliest.
One option is clearing the existing track, repairing the fence, shifting portions of the track away from where the cliff face down to Bushy Beach had eroded, and resurfacing it.
The other is building a new track along the top of the cliff face to replace the damaged section.
Mr Pearce said clearing the track would be a big task.
All the material from the slips would have to be carted away.
There was potential for further damage if there was more heavy rain, he said.
