The funding, spread over nine years, will be administered by an Otago-owned trading company also involving Massey University, the University of Auckland and the Crown Research Institute AgResearch.
The company will carry out gene sequencing and analysis for customers in New Zealand and internationally.
Gene sequencing allows scientists to examine the structure and function of living things, such as humans, animals, plants and bacteria.
Scientists called bioinformationists take the sequencing data and convert it into information which can be used by others.
Sequencing used to be a laborious process until the arrival of more efficient and affordable computerised gene sequencing machines in recent years.
Otago bought a $1 million machine about 12 months ago and has already carried out contracts worth almost $2 million for tertiary institutions, Crown Research Institutes and private customers.
Prof Tony Reeve, directory of Otago's Cancer Genetics Laboratory, said yesterday the new collaborative structure would help New Zealand stay at the forefront in genomics research.
"New technologies and methodologies are emerging all the time.
''We need to keep pace with that change for the benefit of New Zealanders."
He said bioinformationists were "very thin on the ground" in this country, with only about 10 working in dedicated roles.
Dunedin had five of them, based at AgResearch Invermay and at the university.
The grant would enable the consortium to hire eight or nine more, he said.
Recruiting was expected to begin before the middle of next year.
Most would be based in Dunedin.
"Having the money to be able to hire more staff is fantastic.
''You can't run a research vessel without sailors."
Several New Zealanders now working overseas had already indicated they wanted to return, Prof Reeve said.
Their arrival would lead to New Zealand training more bioinformationists through university courses and summer research projects.
The consortium also planned to buy or development sequencing software, and buy another gene sequencing machine in about 2010.
Technology was advancing so rapidly he said he expected the new machine would be able to do its work 100 times faster than today's machines.
Announcing the grant was "a purely pleasurable moment", Research, Science and Technology Minister Pete Hodgson said at the university yesterday.
"This is good for Otago and good for New Zealand, and the consortium's work will be much broader than just New Zealand."
Q & A: GENOMICS
Q: What is genomics?
A: The science of examining the structure and function of genes - the building blocks which make up all living things.
Q: How does it work?
A: Gene sequencing computers provide data on thousands of genes in a relatively short period of time.
Scientists called bioinformationists take the data and convert it into information which can be used by others.
Q: How is this information used?
A: Biomedical scientists use genetics to better understand inherited causes of disease.
This will lead to new ways of treating people. Microbiologists use genetics to develop new ways of fighting infections in humans, animals and plants. Agricultural scientists use genetics to select for improved traits in animals and plants such as leaner meat and drought-resistant crops. Botanical geneticists use genetics to better understand the genetic make-up of native flora and fauna.
This will aid conservation efforts.
Q: Are Dunedin scientists already using genomics?
A: Yes.
Researchers at the Cancer Genetics Laboratory are studying a defective gene discovered in some humans which can lead to an increased risk of developing some forms of cancer.
Scientists are now using the information to develop a diagnostic test which could be sold throughout the world.
People tested and found to have the defective gene could then be monitored closely and treated early if cancer appeared.
Other researchers are identifying genetic variations involved in conditions such as rheumatoid arthritis and gout.
Within five years they hoped to be able to predict who might get rheumatoid arthritis and what level of severity it might be.
Knowing that information will allow doctors to use more appropriate treatments.
AgResearch scientists are gene sequencing methanogens - bacteria which help ferment grass and plant material in animals' stomachs.
As methanogens do their work, methane gas is formed which is expelled by animals and adds to global warming.
The average cow expels 600 litres of methane a day.
Scientists are hoping to develop ways of reducing the number of methanogens without affecting animal health.
