Video shows the device exploding on the empty beach by the water.
Police made an emergency declaration under the Public Safety Preservation Act (PSPA) and cordoned off a large area surrounding the device at 12.30pm.
The exclusion zone encompasses David Low Way from Podargus Parade to Woodland Drive, including Martin Street, Avocet Street, Peregian Esplanade, Parakeet Crescent, Egrer Street, Teal Street, Currawong Crescent, Osprey Avenue, Tern Street, Garnet Street, Ibis Street, Pelican Street, and Kingfisher Drive.
Residents were advised to stay indoors unless notified by police.
It has not been confirmed what the device was.
Members of the public have been urged to avoid the area.