Clutha-Taieri area response manager Senior Sergeant Al Dickie said Dunedin and Balclutha police were called to the incident about midday after receiving reports a man's hand had been cut off with a machete.
The alleged attacker was on the lawn when police arrived, Sgt Dickie said.
"There were police dogs and they [police] were armed so he wasn't going to argue with that."
Police directed traffic past the property on Taieri Mouth Rd as an injured man was stretchered away and a woman stood crying on the balcony.
Sgt Dickie confirmed the woman was inside at the time of the attack.
A St John Spokesman said the patient was transported from the property by ambulance to a nearby location and then flown by rescue helicopter to Dunedin Hospital.
Taieri Mouth resident Chris Knight said the incident was "out of the ordinary" for the seaside town.
"This is certainly out of character.
"I've lived in the area 20 years and we have a very sort of quiet, and respectable neighbourhood.
"Generally around here nothing untoward happens."
Late yesterday a police spokeswoman said no charge had been laid against the man.
A court date was yet to be set.