Walden (24) comes from Taranaki and was head boy at Francis Douglas Memorial College before heading south to study at the University of Otago.
He first played for Otago in 2013 and has played 47 games for the province. He captained the side this year when regular skipper Sam Anderson-Heather was injured.
He was awarded the David Latta Trophy this year for the best player throughout the season, as judged by his peers. The trophy is voted on by players on a points system for every game.
The second five-eighth is contracted to the Highlanders for next season so should play some of his club rugby in Dunedin for the Southern club.
Otago Rugby Football Union general manager Richard Kinley said it was always disappointing to lose players but Walden had given good service to the province and simply wanted to be closer to his family.
His brother Josh, a halfback, had also previously played for Otago but was not selected this season and has now picked up a two-year contract with a club in Hong Kong.
Tei Walden is part of the Highlanders leadership group and is also well respected by fellow players.
His departure is the latest in a series of defections from this year's Otago team.
Halfback Jono Ruru has gone to Auckland and new All Black flanker Dillon Hunt is heading to North Harbour.
Prop Craig Millar has linked with the Sunwolves Super Rugby team and is expected to join up with a Japanese top league side after the Super Rugby season finishes.
First five-eighth Hayden Parker has also joined the Sunwolves and his future may also be in Japan for the rest of the year.
Prop Hisa Sasagi had been called into the Clermont side, a powerhouse in the French Top 14 league. He was set to join the club as medical cover for former Hurricanes prop Loni Uhila but was not cleared by the club's medical staff who discovered an issue with his back. He never played a game for the club.
Sasagi, who played for Samoa on its recent northern hemisphere tour, has now returned to New Zealand.