York police received a call at around 2.20pm from workmen who unearthed the device while working in a garden at a property on Maclagan Road, Bishopthorpe.
They placed a 100 metre cordon around the area and closed local roads.
The army bomb disposal unit was called in. They confirmed it was a live hand grenade, and took it away to be safely disposed of in a field.
The cordons will be lifted shortly.
Police have thanked residents for their patience and understanding while the emergency services dealt with the incident.