The stainless steel fish, surrounded by textured concrete, seems to dive under the Gwynedd town's main thoroughfare.
Artist Benjamin Storch, who created it, held workshops with local young people to produce the winning design.
Regeneration scheme Pwllheli Partnership said it hoped it will "improve the aesthetics of the area".
The eye-catching creation was being installed in Pwllheli town centre on Monday and is due to be completed on Tuesday.
The fish's tail disappears into the pavement near the Conservative Club, and its head emerges over the road by the Mitre pub.
The installation is a joint project by Gwynedd Council's Community Arts Unit and South Pwllheli Communities First, funded by the council's Responding to the Recession fund.
Young people from the Cynllun Ieuenctid Pwllheli (CIP) scheme and students from Coleg Meirion Dwyfor created a number of designs.
The public were asked to comment on them before the final plan for the sculpture was decided.
Coun Roy Owen, Gwynedd's portfolio leader with responsibility for community arts, said the project aimed to "give local people the opportunity to be creative and to contribute towards the work of reviving and regenerating Pwllheli town centre".
"I am delighted that so many people have been able to take part," he said.
Stephen Tudor from the Pwllheli Partnership said there has been a number of projects in Pwllheli recently to enhance and regenerate the centre.
"This project is welcomed as part of this effort," he said.
A divided sculpture of a fish has been installed in Pwllheli, inspired by the town's sea-faring and fishing traditions.