Wellington police communications manager Nick Bohm said the shell, which was about the size of a two-litre milk bottle, was probably a relic from a barracks that was on the property in the 1900s.
"They come up every now and again as people do earthworks. I wouldn't say that they're common but they do crop up every now and again.''
Fifty homes and part of a retirement home close to a Newtown park were evacuated as a precaution before the shell was destroyed this afternoon.
Student Aidan Milner, 19, who had to leave his home, heard the explosion from beyond the cordon.
"We didn't see it but we definitely heard it. It was louder than I expected,'' he said.