The ceremony, part of a year of sesquicentenary celebrations, included welcomes from Chancellor Dr Royden Somerville, and Vice-Chancellor Professor Harlene Hayne.
It featured the awarding of four honorary doctorates and musical performances including a piece from opera singers Kawiti Waetford and Joel Amosa, accompanied by the music department's Prof Terence Dennis.
Governor-General and guest speaker Dame Patsy Reddy spoke of the importance of education and the special relationship between the city and university.
"There is very much a feeling here that the university is the beating heart of this city," she said.
"They will be concerned about the threats to our democratic processes, and understanding of the world when science deniers and peddlers of fake information can so easily reach audiences on social media."
Universities would continue to be the torch bearers for ethical and rational behaviour, Dame Patsy said - and academics would continue to speak up publicly, sometimes airing the "unpalatable" truths people needed to hear.
Dame Patsy read out a letter from Prince Charles - which congratulated the university and said he was "deeply touched" by the honorary doctorate of literature he received in 1991.
He said he particularly recognised the Scottish settlers who established the university in 1869, understanding the importance of education.
Dr Somerville said it was noteworthy that in the centre of Dunedin there was a statue not of a king or queen or politician, but of a poet.
"The founders of the city and the university were the same people, who emphatically believed in an egalitarian society," he said.
Dunedin Mayor Dave Cull was present at the ceremony, along with Otago University Students' Association president James Heath and Emeritus Professor and former Vice-Chancellor Sir David Skegg, who both spoke.
Honorary doctorates were presented to Otago graduates Sir Bill English, Atholl Anderson, Viopapa Annandale-Atherton, and Brigid Inder.