The Aurora was fishing in 50m of water about 5km off Cape Saunders at 5pm on Monday when it pulled the finned bomb up in its nets.
"It came up in a net full of tarakihi and was dangling in the front of the net," skipper Ant Smith said yesterday.
"I just grabbed it.
"There wasn't much point throwing it back. We'd just get it another day.
"I thought that if it was going to go off it would probably already have happened by then.
"But once I'd had a good look at it and thought about what might be inside it, I was a bit too scared to do much after that."
The lightly barnacled and heavily corroded explosive device was about 50cm long and weighed about 11kg.
It was carefully packed into a fish box and Aurora motored back the one and a-half hours to Careys Bay early yesterday.
The area around the wharf, which included a large diesel tank, was cordoned off from 10.30am until 4pm between the Careys Bay Hotel and Cemetery Rd, while police waited for the bomb squad to arrive.
Senior Sergeant Bruce Ross said the cordon was lifted around Careys Bay at 4pm after the round was examined and deemed too corroded to be dangerous.
"The bomb squad wrapped it up in a big, solid blanket and took it away," he said.
"It looks like a bomb that you see in the movies, dropping out of an airplane.
"It's a 25lb [11kg] training round.
"They don't really explode; they just let off a puff of smoke, so you could tell where they hit the ground."
Senior Constable Lox Kellas said unused bombs and mortars were commonly dumped off the coast after World War 2.
"There was a lot of unexpended ammunition dumped at sea off Dunedin, Auckland and Wellington.
"It was standard practice."
However, Dunedin maritime historian Ian Farquhar said he would be surprised if the bomb was from an ammunition dump site.
"Maritime naval dumps were usually well out to sea, beyond the 12-mile limit, so it's pretty odd that it was found that close to the coast," he said.
"I think it's probably just an isolated incident."
The New Zealand Gazette of July 3, 1952, published a notice advising an air bombing and air-to-ground firing range had been established off Cape Saunders at Wickliffe Bay.
"Danger area extends 6000 yards (5.5km) to seaward, from Wickliffe Bay," it read.
New Zealand Navy Museum historian Michael Wynd told the Otago Daily Times yesterday he was not aware of any ammunition dumps off the Otago coast.
"Ammunition dumping happened off Auckland and Wellington, but I haven't come across any evidence of dumping by the navy off the South Island," he said.
"But, there may have been dumping there by the air force or army.
"The armed forces all had a huge problem post-1945, because they had huge stocks of ammunition and ammunition doesn't keep very well."
