More than 1000 guests, from throughout the South Island, are expected to attend.
Notice of the party - called the Castle Street Keg Party - has been posted on the social networking site Facebook, where people can invite their online friends.
Senior Sergeant Gavin Briggs, of Dunedin North, said the party, which is planned for university re-orientation, could raise all sorts of issues.
Police would like to speak to organisers before the party about what would happen on the night, instead of reacting to the situation as it developed.
On Monday, police officers spoke to two female students who had been organising a keg party for July 14, the start of re-orientation week, at a complex of flats on the street.
After being told they would need to consider measures including the provision of food, toilets and rubbish bins, they decided against proceeding.
However, a Facebook site called Castle Street Keg Party said: "Righto guys . . . very unfortunate about the complex party having 2 b closed down, apparently the police also have Facebook."
"This is now a Castle Street individual house party party . . . does in fact differ to a keg party.
"So if you happen to be dressed up, drinking a keg on your property from 10am onwards your [you're] ka pai kids!"
The site says participating flatmates will dress to a theme and drink a keg, much like the Hyde St keg party which is held annually in April.
Snr Sgt Briggs said students could still hold parties if they were sensible.
"We want to work with the students to make sure everyone has a good time," he said.
"But we don't want them going over the top with a big unsupervised hooley-up."
