The polytechnic council passed the resolution this week with little comment.
Marketing, communications and customer relations general manager Mike Waddell said Otago would continue its policy of "grandparenting" fees for students who studied here for more than one year.
That meant their fees for subsequent years would be kept at their first-year fee level.
"I think we are unique in New Zealand in grandparenting fees," he said.
The increase will cost students an extra $250 for short introductory English courses and about $500 for longer courses.
Annual fees for diploma or degree programmes will range from $16,000 to $19,500 next year.
Mr Waddell had initially recommended a zero increase to enable Otago to remain competitive in the international market, but later amended his recommendation to a 3.5% increase because other New Zealand institutions planned to increase their fees by between 4% and 9%.
Last month, the council increased course fees for next year's domestic students by an average of 3.8%.
