CCTV filmed the man climbing a fence into the restricted area near the sign on Mount Lee around 3 am (1100 GMT) on New Year's Day, the Los Angeles Times reported, citing a local official.
The man then used four tarpaulins, two white and two black, to changethe sign's O-letters to e's.
The suspect remained at large several hours after the incident, according to local broadcaster KABC. If arrested, he would face a misdemeanor trespassing charge, Los Angeles police said.
In early November, Californians voted in favour of legalizing the recreational use of marijuana. People over the age of 21 are now allowed to carry small amounts of the drug and are permitted to growup to six cannabis plants at home.
Sunday's incident was not the first time that the iconic sign has been changed to read "HOLLYWeeD."
In 1976, also on New Year's Day, the sign became "HOLLYWeeD" for the first time, according to the Los Angeles Times. Back then the change was the handiwork of a student and his friends, who scaled Mount Lee with 50 dollars worth of curtains as part of a university art project.