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Councillors at yesterday's full council meeting voted to release the draft policy for six weeks of public consultation, beginning on September 1, followed by a public hearing.
That was despite a warning from Cr David Benson-Pope, who supported the move but believed supermarkets and other large off-licence retailers could mount a legal challenge.
Other parts of the country had already faced ''expensive litigation'' as a result of the move towards new local alcohol policies, he said.
And, given the profits involved, councillors could be sure lawyers would be ''extensively employed'' by supermarkets and other large retailers, he warned.
The draft policy suggested closing bars at 3am and a one-way door policy from 1am to prevent early-morning migrations between bars.
Bars' outdoor seating areas would also be cleared of drinkers as early as 11pm, and bar staff would be banned from selling shots after midnight, under the draft policy.
Supermarkets and bottle stores would face some new restrictions, including having to stop selling alcohol an hour earlier, at 10pm.
They would also be banned from selling single units of RTDs, cider or beer - except boutique brands - altogether.
Councillors signed off the draft document for public consultation yesterday, but not before council alcohol licensing officer Kevin Mechen stressed the importance of hearing from the community.
Dunedin Mayor Dave Cull agreed, saying he wanted the policy to be an ''enabler'' for a vibrant city.
However, he questioned why evidence was presented in support of earlier closing times for bars, but not for the ''potential harm'' caused by off-licence closing hours.
It had been suggested, ''rightly or wrongly'', that the harm caused by off-licence sales was worse than that caused by bars, and the issue should be considered during consultation, he believed.
Cr Richard Thomson also supported seeking public input on the draft policy, but questioned aspects of the policy.
That included the merits of banning the sale of some individual drinks from off-licences, while giving boutique beers an exemption.
''Is this just because we want a better class of drunk?''
The make-up of the council hearings subcommittee that would hear public submissions was yet to be determined.
However, Cr Benson-Pope said whoever sat on the subcommittee could expect ''extensive ... strongly opinionated and also strongly divided'' submissions.