Graeme Newton said he was walking in the area when he saw a woman on the beach, which was hit hard by heavy waves, "and I thought what the bloody hell is she doing?".
Later he spotted a dog in the water, "and it was getting hit by the white water again and again".
"I saw the dog trying to swim towards St Clair and I thought, 'good luck to it'."
He estimated the dog had been in the water for 10 minutes and later lost sight of it.
Those same waves had earlier brought down a large sand dune, "and just scoured huge chunks off".
He later scrambled around a slip to talk to the woman, who was obviously upset.
"I went up to her and said 'are you missing a dog'."
"She asked me if I had seen it and I said 'yes, but you are not going to like the outcome'."
The Otago Peninsula resident told him she had been on a dune when it gave way.
Another witness Anthony Legg also talked to the "distraught lady", later helping search for her dog.
He said the track [between the beaches] needed better signage from both ends to prevent people walking in the area, "because it could have been a kid who got washed away".
The track was clearly signposted from the southern end of St Clair beach.
Dunedin City councillor Andrew Whiley said the council was aware of the incident.
Contractors were repairing the area, he said.
O.K. the story here is a dog was swept out by a freaque wave and did not survive on a beach that was hit hard by large waves. Was that a freaque wave? That's not easy to say. So this may or may not be a freaque wave story.