Part of the area was cordoned off yesterday as a bomb disposal team dealt with the live artillery shell.
The device, up to 100 years old and described as 'very dangerous,' is believed to have been washed up in the recent bad weather.
Divers put the shell in a sandbag and took it a safe distance out to sea to carry out a controlled explosion.
Chief diver Kevin Amaira, who co-ordinated the operation, said: 'The shell was a Hotchkiss round and had been fired but was live and very dangerous to move.
'With the recent heavy weather it is possible that the shell had been uncovered on the beach.
'We get most of our calls after heavy weather. You can never tell whether it was washed up on the beach or not.
'This is common around the UK coastline but not on this beach.'
The walker had alerted police at 11.30am yesterday after seeing the six-inch shell near to the Pyramids Centre.
At midday police cordoned off a large area between South Parade Pier and the Pyramids as well as shutting part of Clarence Esplanade.
By 1.25pm a team from the Southern Diving Unit 2, based at Horsea Island, had made the shell safe and the cordon was eventually lifted at 1.30pm.
Sergeant Simon Vardy, from Fratton Police Station, in charge of the police response to the shell, applauded the pedestrian's quick thinking.
He said: 'This was a very dangerous device and it was important that it was brought to our attention because it could have been found by kids.
'Members of the public should always report suspicious findings to the police and must never touch them.'