The living wage accreditation was announced by Mayor Dave Cull in the city yesterday.
The council joins 156 other employers nationally.
This means council staff and contractors will be paid a wage considered by New Zealand Family Centre Social Policy Unit to be "the hourly wage a worker needs to pay for the necessities of life and participate as an active citizen in the community''.
It would affect more than 1000 workers at the organisation.
The wage is $21.15 an hour.
Dunedin city is the second council in the country to become an accredited living-wage employer, after the Wellington City Council did so last year.
Council chief executive Sue Bidrose said the wage did not yet apply to council-owned companies, but this would be phased in over the next three years.
It also only applied to current contracts, but when they expired and were replaced, paying the living wage would be built in as a requirement.
Mayor Dave Cull said he was "absolutely delighted'' to formalise the commitment.
The council is the third Dunedin organisation with the accreditation after chocolate company Ocho and law firm Anderson Lloyd.
Public Service Association union representative Alana Reid said the council showed "leadership and integrity'' in its decision.
