The 45 year-old suspect was spotted roaming around the town in the early hours of Saturday morning.
Police said they had received multiple calls about the “Friday 13th type incident” shortly before 5am.
Armed officers, who were already on patrol in the area, stopped the man around 10 minutes later with the help of Rudi the police dog.
“Imagine coming face to face with a person armed / wearing these,” the response team tweeted.
The police dog's Twitter account added: “PD Rudi made his presence very clear and possibly was the ultimate deterrent in preventing the suspect from running away or fighting officers.”
Photos posted by the police response team showed the knife and a white face mask, which is most similar to that worn by fictional killer Michael Myers in the film Halloween.
Another weapon off the streets!! PD Rudi made his presence very clear and possibly was the ultimate deterrent in preventing the suspect from running away or fighting officers. #teamwork @e_newquaypolice @AllianceArv https://t.co/PzuG8nL07w pic.twitter.com/JcBipzKPvx— PD Rudi (@PDRudi2)June 15, 2019
Nobody was injured during the incident, the police said.
The suspect was still in custody on Sunday morning.