Sir Eion made the announcement yesterday after his retirement as a founding trustee of the foundation.
"I believe the arts are a vital and integral part of our society.
"I also believe strongly in the vision of the Arts Foundation, which is to encourage private patronage for the arts and to celebrate and support our hard-working artists," he said.
The donation had been encouraged by the lifting, in 2008, of the rebate cap on charitable donations, Sir Eion said, meaning 100% of the donation was now deductible, resulting in a potential rebate of $165,000.
"The lifting of the rebate cap certainly makes it easier to give," he said.
"I hope others will take advantage of this and consider donating to the arts, or increasing their donations."
Arts Foundation chairwoman Ros Burdon said the foundation was overwhelmed by the generous donation.
"It is the most significant donation received by the foundation since its inception 10 years ago.
"We are hugely grateful to the Edgar family for making this commitment.
"It demonstrates confidence in the Arts Foundation, its mission and its people."
The donation would be invested in its endowment fund as a donation of $100,000 a year for five years, Ms Burdon said, while plans for income generated from the donation would be announced next year.
Sir Eion is well known for his generosity.
He gave $1 million to the New Zealand Olympic Committee last year, when he retired as president, and was instrumental in the creation of the Edgar Centre, the Edgar National Centre for Diabetes Research and the new Forsyth Barr Stadium, in Dunedin.
The National Business Review last year estimated Sir Eion's wealth at $95 million.
