People were stopped from going to Arrow Cres, Hayle, Blyth, Roach and Ash Sts for about two hours by police stationed at each end of Hayle St and at a walkway from Wansbeck St on State Highway 1.
Some police at the cordons were armed and the Dunedin armed offenders squad was also called out to assist.
The incident started about 2.25pm when residents called police about a man on the back porch of a house on the corner of Hayle and Blyth Sts firing a rifle.
Police put a cordon in place at each end of Hayle St, along with road spikes which were not deployed.
When a 37-year-old man left the house in his car, they arrested him at the Hayle-Solway Sts intersection.
He was later charged with discharging a firearm near a dwelling.
A woman also left the house. She was spoken to by police but not arrested.
Police were unsure the house was empty and the armed offenders squad was deployed to check, clearing the house and recovering the weapon about 4.45pm.
Sergeant Wayne Brew said the offender would appear in the Oamaru District Court on Wednesday.
The firearm was a high-powered air rifle and the man was using it to shoot at targets in the back yard.
Sgt Brew said neighbours did the right thing in reporting the shots.
"Some of these air rifles are as powerful as a .22 and dangerous to anyone in the vicinity."
