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A police spokeswoman said they arrived on Reigo St at 3.08pm after the report.
Police received the report about 3pm from a person who said a man pulled out what appeared to be a gun and pointed it at a wall.
An earlier report from police that the man had brandished what appeared to be a gun and asked someone whether they thought it was real was incorrect, she said.
The man has still not been found and police are asking for the public's help, police said.
Police were looking for sightings of a male of average build wearing a black beanie, brown puffer jacket and a pair of sunglasses tucked in his jacket.
Police were in the process of accessing CCTV footage to examine the incident.
Otago Polytechnic's Dunedin School of Art had been evacuated and cordoned off, and police officers, some of whom were armed, had taken statements from people outside.
A member of the Dunedin dog section and his police dog was also seen rushing into the building.
If you have any information about this incident, and have not yet spoken to police, please call 105.
Information can also be provided anonymously via Crimestoppers on 0800 555 111.