The device was towed by a Navy bomb disposal team to a detonation site in the Solent, where a controlled explosion was carried out at 08:45 BST.
Some trains were halted and early ferries were delayed, following the find on Friday afternoon.
Wightlink Ferries said services were now back on schedule.
The train line between Portsmouth and Southsea and Portsmouth Harbour has also re-opened.
A spokesman for Portsmouth's Queen's Harbour Master said: "We worked very hard to make sure the harbour was not closed.
"There were restrictions put in place for public safety and there was a certain amount of disruption to vessels earlier while the torpedo was towed out."
Dredging work is being carried out in Portsmouth harbour to allow the the navy's new 65,000-tonne aircraft carriers to dock.
Three million cubic metres of sea bed is being removed to deepen and widen a 4 mile (7km) channel.
HMS Queen Elizabeth is due to be handed over to the MoD in 2016 ahead of being put into service in 2020.

The 56-year-old ex-Derbyshire skipper leaves his post as club president to take the newly created job.
Graeme Welch left as elite performance director in June, having been appointed following a management revamp in 2014.
"We have not achieved enough success in recent years. We're determined to change this," said Barnett.
"With a strong captain and players technically sound and tactically clued up, we will be in a great position for next season."
Derbyshire finished bottom of Division Two, having failed to win a County Championship match in 2016.
A review of the "cricket pathway to the first XI" was undertaken, with a new coaching structure put in place alongside a "targeted" recruitment drive for experience senior players, which will be funded by savings made by revamping the coaching team.
Barnett will head a smaller backroom staff "streamlined" and aided by player-coaches, who will work "occasionally" with specialised "world class" coaches and cricketers.
The new structure sees the post of first XI support coach and Twenty20 specialist coach created - neither of which have been filled yet.
"The Elite Performance model regrettably has not produced the results that we have been hoping for," Derbyshire chairman Chris Grant told the club website.
"We have been spending over 20% of our overall cricket budget on coaching and this new model will achieve a better balance between our coaching and playing budget."

The 56ft (17.1m) converted trawler was 6 miles (10 km) west of South Stack when the crew radioed coastguards at 07:00 BST.
Holyhead coastguards said a pump on board the boat was unable to cope with the water coming in.
The RNLI lifeboat crew placed a pump and towed the vessel to Holyhead.
A World War II torpedo has been blown up in the sea off the Isle of Wight after being dragged up from the seabed in Portsmouth Harbour.
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Former England batsman Kim Barnett has been named Derbyshire director of cricket in the latest coaching restructure at the Division Two club.
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Three people have been rescued from a boat which had started to take on water off the Anglesey coast on Friday.