One final stirring parade bearing the New Zealand Scottish Regiment colours brought central Dunedin to a standstill on Saturday, before the colours were presented to a city museum for posterity and safekeeping.

The military parade and formal ceremony marked the disbandment of the final components of the regiment, which formed in 1939.

In his speech at the ceremony outside Toitu Otago Settlers Museum, Dunedin Mayor Dave Cull told guests and members of the public that as the "spiritual home'' of Scottish identity in New Zealand, Dunedin was a fitting place for the colours to rest and it was "an honour and a privilege to be here to receive the colours''.

The impetus for establishing the regiment had come from Dunedin's Scottish community.

The colours would be on display at the settlers museum each year around Anzac Day, and at other times by request.

The colours were presented to the museum, while the regiment's charter was presented to the city council.

The colours were officially handed over by Queen Alexandra's Mounted Rifles commanding officer Lieutenant-colonel Hamish Gibbons to museum director Jennifer Evans.

They were piped into the museum to the strains of Auld Lang Syne.

The Dunedin RSA choir had performed Highland Cathedral, proposed as a possible Scottish anthem.

About 200 people attended the ceremony outside the museum which followed the parade.

Protocol decreed that 100 soldiers take part in the final parade before the colours were laid up.

About 80 of the soldiers were from the Queen Alexandra's Mounted Rifles, and about 20 were Otago members of the 2/4 Battalion of the Royal New Zealand Infantry Regiment.

The parade started in the Queen's Gardens at 1.15pm, involving more than 100 soldiers, about 50 veterans, two light armoured vehicles and the New Zealand Army Band.

A crowd gathered to watch it head up Princes St to the Octagon, to face a ceremonial challenge from the New Zealand Police.

After the challenge, the parade moved down lower Stuart St to the museum.

The regiment was disestablished in 1990, and was formally disbanded in 2013.