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The plan, which would ban smoking on all campus property, was revealed yesterday by the university's smoke-free campus implementation working group student representative, Beau Murrah.
The move was confirmed by vice-chancellor Prof Harlene Hayne.
A policy banning smoking within 6m of any building on campus was introduced in 2010.
Mr Murrah, a fifth-year law and arts student, said the working group met for the first time yesterday to discuss how the university would go about implementing the ban.
Prof Hayne said discussions about a smoke-free campus began earlier this year.
She said the vice-chancellor's advisory group supported the introduction of a smoke-free campus at the beginning of 2014.
"This timeline allows a careful phase-in period, including provision of extensive quit support for smokers who wish to become smoke-free."
The university supported the policy because it wanted the campus to be a healthy environment.
"As a large employer and an institution that accommodates many young people, the university wishes to promote environments that are safe and healthy, and that all staff, students and visitors can enjoy," she said.
Asked if it would affect pro-cannabis law reform group Norml's twice-weekly protest on campus, she said: "Staff, students and visitors are expected to comply with all university policies."
The move would bring the Dunedin campus in line with the university's other campuses and the universities of Auckland and Canterbury, Victoria University and Otago Polytechnic, all of which have already adopted smoke-free campus policies.
Mr Murrah said the working group, which was headed by Prof Janet Hoek, of the marketing department, brought up the results of an Otago University Students' Association (OUSA) referendum held this year, which showed 78% of respondents supported such a ban.
Despite being a smoker himself, Mr Murrah said he supported a smoke-free campus.
"I view it as inevitable and think it is a good idea. I recognise the evidence about second-hand smoke and it probably will be good for the university's marketing."
However, he was concerned about the impact it could have on Norml and on smokers who went to university bar ReFuel.
OUSA president elect Francisco Hernandez said this year's referendum result meant it would support the policy.
Norml acting president Julian Crawford said the group would look for ways to get around the ban in its protests.
Cancer Society Otago and Southland Division health promotion manager Penelope Scott said the policy was a good move.
"The Government has a goal of a smoke-free New Zealand by 2025 and I think that this move by the university is well in keeping with that," she said.