The Shanghai institution is one of China's top three universities and is the highest-ranked Chinese university with which Otago University has signed such an agreement.
The Shanghai Jiao Tong University has 38,000 students and is internationally known for publishing an annual academic ranking list of the world's top 500 universities.
Otago University and the Shanghai institution were included in the same 201-302 world ranking band in last year's top 500 list.
A delegation from the Shanghai university visited Otago University on Thursday, touring part of the campus and meeting senior administrators in health sciences and marine science.
The memorandum of understanding was signed by Otago vice-chancellor Prof Sir David Skegg and Prof Ming Su, who headed the Chinese delegation and is deputy president of the Chinese university.
Prof Skegg said Otago University valued its links with the Shanghai Jiao Tong University and greatly appreciated Dunedin's sister city ties with Shanghai.
The agreement followed a visit to the Shanghai institution in 2007 by an Otago University delegation led by Prof Skegg, and some previous academic links between the universities.
Prof Sarah Todd, the university pro-vice-chancellor (international), was "really pleased" at the significant progress made in the relationship between the two institutions.
Otago University would gain significant "reputational benefits" in China and the closer academic links with such a highly-regarded Chinese university would be helpful in attracting Chinese students to study at Otago in future, she said in an interview.
The agreement aims to encourage co-operation in disciplines taught at both universities and promote the exchange of information.
It also aims to promote exchanges between academic, research and administrative staff and research students.
