Senior Sergeant Anthony Bond said a 41-year-old mother pulled over in Rattray St to pick up her children from school about 3.20pm on Monday, but forgot to put the handbrake on before getting out of the car.
The car then started to roll backwards down the street, with her 13-year-old daughter sitting in the front passenger seat.
"The car rolled about 10m-15m backwards down the street, and the rear of the car hit the front of another vehicle that was being driven by a 49-year-old male," he said.
"The car then hit a nearby median strip and got stuck in a bed of flax.
"A member of the public managed to enter the car and apply the handbrake."
A relation of the member of the public who stepped in to save the day told the Otago Daily Times the woman who pulled the handbrake was picking her children up from school when she saw the driver of the other vehicle screaming.
She leapt into action, jumping out of her own car, making her way into the other vehicle and applying the handbrake.
Her children were gobsmacked watching their mother and were very proud of her, the relation said.
Snr Sgt Bond urged drivers to apply the handbrake every time they got out of their vehicle.
"Particularly in Dunedin, where we’re surrounded by hills, the handbrake comes in handy and prevents a terrifying experience like that for all involved — for mum, daughter and members of the public."
St John attended the incident to assess the occupants, but no injuries were reported.
The road was partially blocked until the vehicles were both towed and the road was cleared of debris.