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Union Co Cafe owner Pete Cole said reducing the limit from 50kmh to 40kmh for about 600m of State Highway 88 would make the area safer.
"It will be better, so long as it is policed," he said.
Mr Cole, who is also a Vision Port Chalmers committee member, said a campaign ran for about 15 years to lower the limit in George St.
The George St businessman had pushed for a 30kmh limit but said 40kmh was a sensible compromise.
"Slowing down the traffic also makes a huge difference to vibrations in heritage buildings," he said.
The new limit, from near Wickcliffe Tce to the Beach St rail crossing, will take effect on October 23.
The speed limit was reviewed in 2012 but, at that stage, the NZ Transport Agency (NZTA) decided against any reduction.
Protests were held, submissions were made and petitions signed.
Several technical reports and assessments were carried out before the agency confirmed the change yesterday.
"For some time there has been strong community support in Port Chalmers for a lower highway speed limit through the town, which was supported by the Dunedin City Council, Automobile Association and New Zealand Police," NZTA regional relationships director Jim Harland said.
"We knew many local people were concerned about increasing traffic volumes and vehicle speeds in their town."
The agency received 220 submissions about the proposed change. People who provided feedback were worried about large trucks using the highway and increased traffic volumes, which resulted in some elderly people and children finding it difficult to cross the road.
Submitters were also worried about the safety of cruise ship passengers who used the town’s main street.
Port Otago chief executive Kevin Winders said port management supported the lower limit.
The port had already voluntarily brought in a 30kmh limit for heavy traffic.
Mr Harland said several submitters advocated strongly for a 30kmh speed limit.
The agency took into account that the highway was a key road freight route to a major port, he said. Parts of the community were also keen to retain parking and were opposed to raised concrete platforms that would have been needed to encourage compliance with a 30kmh limit.