"Around 80 residential blocks must be evacuated after a World War II bomb weighing 50 kg was found in Pala street," Melinda Varkonyi, a spokeswoman for the Hungarian army, told state newswire MTI.
Once the area has been cleared, army experts will secure the device, she added.
Two hotels and the French Cultural Institute were among the buildings ordered to be emptied in this touristy part of town.
Cites and towns across Nazi-allied Hungary were bombed heavily during the final months of the war by US, British and Soviet forces, with Budapest carpet-bombed on 37 occasions.
Many unexploded devices were buried in the ground and are often uncovered during construction work, leading to 13 evacuations in the capital since 2008. All the bombs were secured without damages or injuries.