The man was seen flying the drone in Earnslaw Park with friends on Tuesday night.
Despite being warned by a bystander that he was breaking the law by flying the drone after sunset, the man later crashed it into the Peppers Beacon hotel.
Senior Constable Chris Blackford, of Queenstown, said the drone was recovered by a hotel employee and handed in to police on Wednesday.
The DJI Phantom Vision quadcopter, which has a camera attached and is worth about $1800, had minor damage.
The man may have been too embarrassed to retrieve it, Snr Const Blackford said.
The drone's owner, who is believed to be a Chinese tourist, was spoken to before the incident by Queenstown resident Colin Aitchison, who operates drones for his aerial photography company, Droneworks New Zealand.
Mr Aitchison said the man appeared to be filming another couple walking along the waterfront, but was ''flying it like a tool''.
''He was all over the shop.''
He told him flying after sunset was illegal and he risked getting in trouble with police.
''He just turned his back and ignored me.''
A drone flown in an urban area by an unskilled operator could be dangerous, yet their numbers in Queenstown had grown rapidly from three or four two years ago to about 40, Mr Aitchison said.
Civil Aviation Authority (CAA) spokesman Mike Eng said the incident could have breached the agency's rules.
If a CAA investigation found that to be the case, the drone's owner could be given a formal written warning, an infringement notice and fine, or be prosecuted.
He encouraged anyone with information about the incident to contact the agency or police.
''Because unmanned aircraft can fly faster, further and higher than traditional model aircraft, they bring greater safety risks for other aircraft, as well as people and property on the ground.''
The agency was considering public submissions on a draft rule for unmanned aircraft operations, and expected to submit that to Transport Minister Simon Bridges next month, Mr Eng said.
