More than 60 people attended the event at the library's ground floor, where praise was offered to Manjushri, a deity of transcendent wisdom, and prayers ended the event.
The sand, derived from crushed marble, was later carried to the Otago Harbour mouth and cast into the water.
The sand had been swept up by the Lamas - teachers in Tibetan Buddhism - and released into the natural waterway "to allow the healing benefits from the mandala to be carried throughout the world".
The ephemeral nature of the sand mandala art work was a "Buddhist lesson in impermanence", and this was highlighted when "the beautiful and symbolic patterns" were "destroyed before our eyes", he said.
Centre organisers yesterday thanked public library staff for their support for the mandala project, and said that 260 school pupils had recently visited the mandala and undertaken related art work at the library.