The university has joined forces with the Silicon Valley company for the creation of its master’s degree in digital technology at its soon-to-be-created Queenstown campus.
Otago academics say PANW has ties to the Israeli Defence Force and government.
Earlier this month, PANW secured a $250 million contract to supply the Israeli government, while the company was founded by Nir Zuk, a former officer in the Israel Defense Forces (IDF), who served in Unit 8200 (cyber warfare) and was head of software development.
But Otago University vice-chancellor Grant Robertson said he does not "accept the characterisation of the partnership" as being linked to warfare.
Otago Staff for Palestine member Prof Richard Jackson said the agreement with PANW could pose a major "reputation risk" for the university.
"This is a company that’s deeply embedded with the Israeli government and it’s deeply embedded with what the Israeli government’s doing.
"So it could become hugely damaging to the university’s reputation as a good ethical institution."
Prof Jackson said a group of academics had been working closely with the university to develop an ethical investment policy and the moves seemingly went against this.
"We’ve tried to get answers but it’s hard to know exactly what the reasoning is behind this [deal with PANW].
"What we’re saying is that competitiveness and financial considerations need to be totally balanced against issues around human rights, around international law and around what kind of example does this set to students and potential members of the university."
Recently, the Otago Daily Times reported on a discussion document prepared by the university for the New Zealand Defence Force over research co-operation.
Prof Jackson said the two initiatives were indicative of the fact that "the way the world is at the moment, anything to do with the military or security is making huge amounts of profit".
"We ought to be working against this trend, not for it."
The issue has also caught the attention of the Palestine Forum of New Zealand, which is calling on the university to reconsider and suspend the partnership with PANW.
Mr Robertson said the partnership with PANW followed discussions with several technology companies about supporting the university in developing programmes in digital technology.
"Our agreement with Palo Alto is focused solely on curriculum development for the technology work in Queenstown. It is not related to any other activity undertaken by the company.
"Palo Alto Networks is a major provider of cybersecurity services across the world, including in New Zealand.
"Our engagement is limited to that educational context."
Mr Robertson said it undertook due diligence on PANW prior to the partnership agreement being finalised.
Asked about the partnerships between the NZDF and PANW, Mr Robertson said these areas of work were distinct and should not be seen as connected.
