South of Waikouaiti the road again becomes steep, rising sharply over the Kilmog hill before dropping down to the coast at Blueskin Bay, then rising again via Dunedin-Waitati Highway (a two- to four-lane carriageway which used to be designated a motorway) to the northern outskirts of Dunedin. From here it descends a steep, twisting stretch of Pine Hill Road through Pine Hill, before passing the University of Otago and heading through the city centre. For much of its route through Central Dunedin the highway is split into two separate northbound and southbound roads, part of the city's one-way street system. These roads traverse the central city 2–3 blocks southeast of the heart of the CBD. At the southern end of central Dunedin, the highway becomes the Caversham By-pass, which rises along the Caversham Valley before again becoming a motorway at the saddle of Lookout Point.