Six wagons came off the tracks on Friday night, spilling a total of about 250 tonnes of coal beside the line and partly blocking State Highway 1.
The coal was heading to Fonterra at Clandeboye, in South Canterbury.
The wagons broke away from the northbound freight train on a level crossing between Gorge St and Nelson St.
KiwiRail staff, aided by heavy machinery, worked through the weekend until the line was cleared just before lunchtime yesterday.
Some of the wagons were recovered from the site while others had to be shifted to the side.
About 300m of damaged track had since been repaired, a spokeswoman said.
The first train to reuse the route — at noon yesterday — went from Dunedin to Edendale without incident.
The KiwiRail spokeswoman said the company would investigate the cause of the derailment.
It could take up to a month to complete, she said.
Clinton volunteer fire brigade chief Bill Harris and his crew were involved primarily in traffic control after the incident.
He said two cranes, diggers and dozens of men were involved in the clean-up.
He believed it was fortunate it was the tail end of the train, rather than the middle, that had derailed where it did.
People had been talking about "a different noise" coming from that section of the track for a few days but he was unsure exactly what the problem might be.
Dunedin man Mike Owen was travelling home from Invercargill when the incident unfolded.
"The train was going past and it got louder and louder and I thought ‘This is odd’ and then I saw sparks coming off it high in the air and then part of it fell off the track."
There were about five cars on the road when the incident occurred and Mr Owen said it was fortunate the carriage derailed on the Balclutha side and missed traffic.
"It made a real mess."
Part of a train track switching device was bent high in the air after the derailment, Mr Owen told the Otago Daily Times.
KiwiRail said planned track-work maintenance and renewals would continue as usual throughout the South Island network.
