This figure equated to an estimated 16% of Dunedin's gross domestic product (GDP) and generated an estimated 16,855 full-time equivalent jobs for the city.
The university's economic impact report for 2011 showed the "total expenditure" of its campuses in Dunedin, Christchurch, Wellington, Auckland and Invercargill was $1.65 billion.
Of that, $1.42 billion was generated by the university's activities in Dunedin, and $779.33 million was calculated to have remained in the local economy - which the university called the "total value added".
The "total value added" figure was 3.3% higher than in 2010 when the university's activities contributed $754.2 million to the Dunedin economy.
The "total value added" and "total expenditure" figures included both direct spending by the university, its staff and students, as well as "downstream effects" on the rest of the economy.
Vice-chancellor Prof Harlene Hayne said the report showed the vital contribution the university made to Dunedin.
"The thing that sets us apart from every other town or city in the country is the fact that we are a university city, and one demonstrable benefit of this is the economic contribution made by the university," Prof Hayne said.
Its impact on the city went beyond just its economic importance, she said.
"The value our graduates and staff create for both Dunedin and beyond should not be overlooked when considering the larger positive impact the university makes."
The university had also worked with other organisations on initiatives which benefited Dunedin.
"The way we have all worked together to save our neurosurgery services is just one example, and another has been the joint approach taken with both the city and other key groups to develop a new economic development strategy for Dunedin."
The report said the university's activities contributed $44.76 million to the Christchurch economy, $41.19 million to Wellington, $2.86 million to Invercargill and $665,437 to Auckland.
