A Palmerston North man should not have been arrested and the officers involved acted unprofessionally, says the Independent Police Conduct Authority.
The watchdog for police said the officers aggressively confronted the man and his friend about 3am on 26 September last year, after they did not cross an intersection at a pedestrian crossing.
The men were standing in the middle of the road. When one of the officers told them to get off the road, the men yelled abuse in return.
The interaction escalated when police got out of their vehicle and confronted the men. One man was arrested for disorderly behaviour and was later released on a formal warning.
However, in a decision released today, following a complaint from an independent witness, the IPCA found the man had not behaved in a disorderly way.
A parallel police investigation also found the officers' approach to the situation caused it to escalate.
IPCA chair Judge Colin Doherty said the authority did not think the officer had good cause to suspect the man had behaved in a disorderly way as applied under the Summary Offences Act.
"We believe the officers should have made relevant inquiries to satisfy themselves that the man's behaviour upset the public order or was likely to provoke a violent reaction. They did not."
Police have accepted the report's findings, apologised to the man, and cancelled the formal warning.