Police had issued a warning to people in the Crossmaglen area to be vigilant after a number of reports of suspicious objects in the area on Tuesday evening.
The following day a suspect item was found close to the North/South electricity interconnector in the Dundalk Road area, which links the networks on both sides of the border.
Two homes in the area were evacuated.
Army bomb experts declared the object - which turned out to be a gas cylinder - to be an elaborate hoax on Friday afternoon, and the major alert has now ended.
The object has been taken away for further forensic examinations.
Chief Inspector David Beck thanked the local community of Crossmaglen for their "patience and understanding" during the course of the policing operation.
It is important to condemn those who caused this upset, the overwhelming number of people in the community do not want this type of activity and we as a police service will continue to work to bring those responsible before the courts.
Chief Inspector David Beck
"The security alert which began on Tuesday caused significant disruption to the people of the area, but the protective approach to the policing operation was justified", the Newry Area Commander said.
"I make no apologies for the duration of the policing operation, which resulted in two homes being affected however the work, experience and expertise of officers on the ground resulted in a positive outcome," he continued.
"I would finally like to take this opportunity to ask the people of the south Armagh area to continue to remain vigilante and report any suspicious activity in the area to police.
"Or, if someone would like to pass on their information without giving their details, they can contact the independent charity Crimestoppers on 0800 555 111."
Local Sinn Féin MP Conor Murphy has said those behind the incident "have no interest in Irish freedom ".
"The people of this area are totally opposed to this activity and these people should stop it immediately," he said.
SDLP MLA for Newry and Armagh Dominic Bradley said the disruption the alert caused "was downright disgraceful".
"This type of action is pointless and serves no purpose whatsoever because the only people suffering are local people.
"People are fed up, and I would urge anyone who knows anything about these attacks to contact the police."