A teenager armed with a firearm who was reported to be in a central Otago town has not been found after an extensive police search involving the Armed Offenders Squad.

Cromwell residents were told to lock their cars and stay indoors today after a European male in his late teens, who was linked to a domestic incident in Dunedin and was thought to have a gun, was reported to be in nearby Lowburn.

However Senior Sergeant Ian Kerrisk said police are confident there is no safety risk to members of the public.

A search was carried out on foot and by helicopter this afternoon, Kerrisk said.

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"This was as a result of receiving information that there was a person of interest in relation to an incident in Dunedin last night, who was in the Lowburn area and in possession of a firearm.

"Given that possibility, for the safety of everyone involved, cordons were put up and the Armed Offenders Squad brought in as a precaution, and to clear the area."

Police also followed up several reported sightings of possible persons of interest, and were able to eliminate some people who were found in the area.

The teenager has not been found but Kerrisk said police were confident there was no safety concern or risk to members of the public in the area.

Cordons have now been stood down although police are still highly visible in the area and would be staying overnight, Kerrisk said.

"We are in close liaison with the family of the person of interest, and continuing to work with them. We urge this person, or anyone in touch with him, to please come forward to police so we may resolve this matter safely."

Locals are still being told to lock their cars and homes and report suspicious activity to police.

"This is a small, close knit community, and locals will notice anyone out place, and we urge them to ring us immediately if so," Kerrisk said.

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"Some locals who left the area this afternoon were not allowed back for several hours, and we are grateful for their patience and understanding. While we understand the disruption for some, it was to ensure the safety of all involved, which is our primary concern."