The comments come as equivalent full-time international students enrolled at Otago University fell by 18.83% from 2050 in 2007 to 1664 last year.
Numbers have continued to drop, with 109 fewer full fee-paying international students at the end of July compared with the corresponding time last year.
Mr Joyce said he had asked the university to look "very closely" at what it was doing to attract international students. The university "definitely" could do more.
"I met the chancellor and the vice-chancellor some weeks ago and they told me that they were working on it, so I am looking forward to seeing the progress there."
The university's "very low" cap on international students, of 12% of total enrolment, was one policy he would like changed, he said.
Increasing the number of international students would not only stand the university in good stead, but would also provide a boost for whole city.
Otago was not the only university which needed to raise its game, with international numbers flat across the whole sector at a financially tight time when there was a need to increase universities' incomes.
"Why hasn't there been more success, particularly when other sectors ... have had success in growing international numbers, including the polytechnic sector?"
Otago University said it was unable to respond to Mr Joyce's comments yesterday, but its director of planning and funding, David Thomson, said last month it was proving difficult to attract international students, with the South Island in particular not as attractive for single-semester study abroad students from North America.
Otago University international pro-vice-chancellor Prof Sarah Todd said earlier this year the university had trouble convincing overseas tertiary institutions Dunedin was not an earthquake risk.
Mr Joyce's criticisms came after a group representing New Zealand's eight universities took umbrage with him this week for comments he made about the performance of university councils.
Chancellors' Committee chairman Roger France said New Zealand universities were performing well compared with overseas counterparts.
"Contrary to the minister's claims that we are lagging in international education, New Zealand universities have the fifth highest proportion of international students in the OECD."
There was no evidence council size had a negative effect on university performance, he said.
In response, Mr Joyce said: "The point that I was making was that we have to be looking, at all times, at options to strengthen our universities and governance is one of the things we want to look at."
A review of university governance was under way.
