This was equivalent to about 17% of the city's gross domestic product.
The university's Economic Impact Report for 2010 was tabled at the university council meeting yesterday.
University of Otago planning and funding director David Thompson told council members the report estimated the economic impact of the university and its campuses in Dunedin, Christchurch, Wellington, Auckland and Invercargill.
The Dunedin campus was by far the most significant, with about 93% of the university's students and 86% of its staff situated there.
The report first considers the "actual expenditure" of the university and the estimated expenditure of its staff and students, resulting in an overall estimate of "direct expenditure" of about $858.7 million.
Flow-on, or indirect, economic impacts of the university were assessed and "total expenditure" was calculated at about $1.6 billion.
The report said the total expenditure result estimates the "global economic impact" generated by the university's activities.
Mr Thompson said the key figure outlining the economic benefits to Dunedin was the "total value added" estimation, which was about $754.2 million.
The report says the "total value added" estimation is calculated on the value that remains in local economies after "economic leakages" are taken into consideration, along with the downstream employment effect of the university's expenditure.
"Economic leakages" include items bought in an area but produced outside that area. In these cases, some of the value of the item will flow outside the area.
The Dunedin economy had the equivalent of 11,892 full-time jobs supported through direct university spending. The figure for Invercargill was 48.
