Authorities said a resident reported the big cat to Berkeley police and firefighters around 2 a.m. Tuesday near an intersection about three blocks from the University of California, Berkeley campus.
(Scroll down to watch a report from CBS News Station KPIX-TV in San Francisco)
The animal ran down a street and jumped the fence into the playground of a church, said Mary Kusmiss, a police spokeswoman. The animal was later seen roaming through backyards before officers caught up with it.
Police and state wildlife officials quickly deemed the animal a threat to public safety. An officer killed it with a patrol shotgun at about 3:30 a.m., Kusmiss said.
"I've been working for Fish and Game since '97, and I've never heard of a lion in an area like this," said Pat Foy, a state game warden. "It's very unusual."
Berkeley resident Ursula Schultz, who lives across the street from where police killed the mountain lion, said the lion seemed small, barely bigger than her 95-pound German shepherd, CBS News Station KPIX-TV in San Francisco reports.
"I feel sad the animal had to be put down," Schulz said. "I understand why, but it's tragic."
Foy said the big cat's size was average for an adult female mountain lion, and that he has not ruled out that it was being kept as an illegal pet since no lions have been spotted in Berkeley in recent years.
Kusmiss said police feel confident officers took the right action in killing the animal "considering the densely populated area in which the animal was in, the homeless that sleep in the area, the overnight employees who clean businesses and the like."
The Gourmet Ghetto is a section of the city known as the hub of the California cuisine movement spawned in the early 1970s by Waters and other nearby businesses, including the first Peet's Coffee and The Cheese Board Collective.
The restaurant did not immediately return a call seeking comment.