Armed offenders squad members, including a dog squad, have swarmed on a small tin-roofed, rough cast home in Surrey Street in Gore.
A woman is sitting outside the house in the company of an armed officer and other officers are moving through the property.
Police have established armed cordons on several intersections around the property.
Armed police poured into Invercargill Airport after a suspected sighting of a wanted man, Hori Gemmell, which turned out to be a false alarm.
Police are seeking the 24-year-old over the theft of a police car, and two police Glock pistols from it in Gore late on Wednesday.
An airport spokesperson has confirmed the sighting of Mr Gemmell was a false alarm.
A staff member thought they saw Mr Gemmell leading to the police response.
Police have confirmed the pistols were stolen from the lockbox of a patrol car, which was rammed and taken after the officers left the keys in its ignition to chase Mr Gemmell on foot.
Police say Gemmell doubled back to the car before driving off in it and using it to ram a second police vehicle.
All officers in eastern Southland and Invercargill have been ordered to carry firearms while Mr Gemmell remains at large.