An international review published in the Journal of Biological Conservation by BirdLife International found 400,000 birds worldwide died annually from recreational and commercial set nets.
But the umbrella group for commercial fishers says those figures are exaggerated and any ban around Otago would put a serious financial dent in the industry.
Forest and Bird seabird advocate Karen Baird said there were fewer than 600 pairs of yellow-eyed penguins left on mainland New Zealand, with about 150 of those living on the Otago Peninsula.
"The current 4km-wide set net ban around the Otago Peninsula's coast should be extended to around the 150-metre depth contour, the extent to which yellow-eyed penguins are known to forage," she said.
"This effectively means that the protection zone needs to extend to around 20 kilometres offshore."
The birds were a cornerstone of Otago's $100 million a year eco-tourism industry, which meant there was was also very good economic reasons to ban the nets.
The risk of losing the yellow-eyed penguin colonies on the peninsula was particularly high right now, with 56 birds having been found dead around the Otago Peninsula this breeding season - the victims of an unknown toxin, she said.
New Zealand Federation of Commercial Fishermen vice-president Allan Rooney said a observers on boats in waters off Timaru and Taranaki found no seabirds killed in set nets.
An extension on the set net ban area around Otago could result in a financial blow to the fishing industry there.
"It would make a major difference to the guys down there and also to the New Zealand economy."
