The Grey District Council closed all entry points to the CBD at 11am, after bow waves from cars threatened to flood parked vehicles.
Mayor Tania Gibson said they were activating the emergency plan and decided to shut the town until further notice, with contractors stopping traffic.
"Vehicles are pushing water into cars."
Regent Theatre staff started contacting patrons as the water level rose to the bottom of car doors.
As cars drove past in the floodwaters, it reportedly lapped into some vehicles. Although it came close, the water did not inundate many premises.
The downfall left pedestrians stranded throughout the centre of town, unwilling to wade through water shin deep to get to their cars.
In doorways, shoppers took shelter waiting for the rain to stop — but it continued unabated for about an hour.
The severity of the rainfall took everyone by surprise. The Greymouth rain station temporarily stopped issuing updates from about the time the deluge hit, making it unclear how much had fallen. It came back on-line about 11.30am, showing 31mm for the past hour, and 44mm in six hours.
Metservice meteorologist John Law said a thunderstorm that came through brought the localised downpour, with "intense bursts".
Some heavy showers also fell inland.
Mr Law said the slow, warm moist air mass had created a perfect combination.
"There could be more thunderstorms this afternoon, hopefully rainfall into the Grey River — (it will) turn a lot wetter at end of the week."
Retailer and photographer Stewart Nimmo said the rain had come "out of the blue" and was one of the heaviest downpours he had seen.
At Alf Harrison Menswear, John Gilshnan said it was "a heck of a downpour".
Looking up the street to the Pounamu Pathway site, the Fire Service was stopping traffic entering the town about 11.30am.
"We don't cop it as much on this side (of the road)."
Some rain fell in the parched Grey Valley. Ngahere got 32mm in the 24 hours to 11.30am, and Mawheraiti 16mm. Haupiri fared less well with just 5.4mm. Hokitika had 25.6mm.
