The seal, a juvenile female, had made its way to the head of the harbour and on to the road.
It was hit by a car about 8am. The driver did not stop, but other motorists called police.
Senior Sergeant Steve Aitken, of Dunedin, said police consulted the Department of Conservation (Doc) and decided the animal's injuries were not survivable.
An officer shot the seal at the scene.
Doc Coastal Otago community relations programme manager David Mules said the seal had internal injuries, a broken spine and broken ribs.
It was unusual for a seal to come to the head of the harbour and fur seals were generally shyer than sea lions, he said.
"It is part of the pleasure and the responsibility of living in a city like Dunedin where wildlife is so close."
The seal was buried yesterday.
Mr Mules said it seemed the driver would have had little option to avoid hitting the seal.
Snr Sgt Aitken said if drivers hit an animal they should stop, and call police if necessary.