Two fire appliances were called to the scene just after 1pm.
Mosgiel firefighter Richard Yardley said welders were working on a railway track and ''we suspect that is how it started''.
''Once it got a hold, it travelled very fast.''
The blaze, which started in long grass between the railway line and SH1, measured about 100m and was being fanned by strong southerly winds.
The highway was closed for 30 minutes because of smoke, but one lane was later reopened ''until we got things under control'', he said.
Water was the biggest issue, with firefighters assisted by a pump from Dunedin International Airport, Mr Yardley said.
The Mosgiel appliance was also used to truck water from nearby Momona to supply the Outram appliance.
''It is very, very dry and the message to the people of Otago is to be aware of the dryness.''
