A man has been arrested after a gun was pointed at an officer, cars taken and a chase around much of Otago that began on Saturday night.

The 38-year-old was arrested at a Milton property at 10am today after it was surrounded by police and the armed offenders squad. It follows an a more than 10-hour search of the South Otago town.

The 38-year-old was tracked by two police dog handlers.

He has links to Waimate and Timaru.

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"Police teams worked through the night to find the man who was located at a property in Milton this morning," Acting Southern District Commander Acting Superintendent Darryl Sweeney said.

"The man will face a raft of charges which are currently being assessed."

The man failed to stop for police about 6:30pm on Saturday," police said.

"A pursuit was then initiated and the vehicle came to a stop near Cromwell.

"The driver of that vehicle presented a firearm at an officer, before taking a police vehicle and fleeing the scene.

"He then travelled towards Alexandra, abandoning the police vehicle and taking a vehicle from a member of the public."

Supt Sweeney said police from Dunedin and Queenstown areas responded with two helicopters and armed offenders support.

"The vehicle the man took was recovered in Milton around 11.45pm, where he fled on foot.

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The manhunt started after a vehicle of interest failed to stop for police about 6.30pm on Saturday.

The second car was found abandoned in Milton at 11.45pm and Otago Daily Times readers have reported a heavy police presence in the town overnight.

Supt Sweeney said the pursuit was initiated and the vehicle came to a stop near Cromwell.

The driver then presented a firearm at police, before taking a police vehicle and fleeing the scene along State Highway 8.

The driver has then abandoned the police vehicle near Signal Creek, and taken a vehicle from a member of the public.

The member of the public was shaken, but unharmed.

The police vehicle was recovered. No police issue firearms had been taken.

The man then travelled south along SH 90, and continued driving.

Police would like to thank the public for their assistance.