He believed someone had possibly used it as an ornament.
"They were quite common in New Zealand, used by our military forces for training. It's in quite good condition for its age."
The disposal unit will take the grenade back to Wellington for disposal.
"Or it may find a new home in our museum."
The container the grenade was found in was used to store a later type of fragmentation grenade, the M67, of Korean and Vietnam war vintage.
Police mounted a guard at the property where the grenade was securely stored during the day.
Senior Sergeant Lincoln Sycamore said the man who found it in the street acted responsibly in calling police.
"He did all the right things we would expect a sensible member of the public to do."