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The major project was dropped from a list of priority projects for the university as it reviewed spending amid the financial fallout of the Covid-19 pandemic.
It followed news the Government had declined $102million in shovel-ready grant funding applications by the university.
University chief operating officer Stephen Willis said in a statement this week the institution was still exploring its options, and the project would depend on the future financial position of the university.
Mr Willis said options for the university’s building complex on the corner of Cumberland and Union Sts had not been put to the University of Otago Council for approval.
But the intent of the original project had been to strengthen the building facing Union St and to replace the interconnected building facing Cumberland St.
The first stage of the refurbishment and extension was already finished and the university had consolidated staff, students and equipment from six buildings into three.
The other work that had been proposed was intended to create: space for staff, students, and equipment to all be in one building rather than several places; a purpose built space for the new curriculum created about two years ago; room for projected growth; and direct street access for those attending the exercise prescription clinic and research groups.
For the project, and others that had not been prioritised, the university was examining options to increase its annual surplus or to negotiate alternative funding arrangements, Mr Willis said.
University of Otago School of Physical Education, Sport and Exercise Sciences dean Chris Button said the decision was "obviously disappointing" given the work that went into planning.
The school was going to look for other ways to cater for its encouraging growth in student numbers, Prof Button said.