Timu has played just one game for Otago, against Northland last year.
Timu, the son of All Black John Timu who played more than 100 games for Otago from 1988 to 1994, is a promising player and a student at the University of Otago.
Timu, an outside back, was educated at John McGlashan College and plays for the University club.
New Otago coach Ben Herring said it was fantastic to sign Timu and he was a welcome addition to the team.
"He has been impressive in a number of areas, and has really caught people’s attention. His growth has been fast and if he continues on in the same fashion, he will have a promising future in the game," he said.
He played for the Otago under-19 side and is part of the union’s academy programme.
General manager Richard Kinley is also delighted with the signing.
"It is extremely pleasing to see another local player that has worked his way through our age-grade and academy programmes take the next step in his rugby career," Kinley said.
Kinley said with some players leaving the union there were more player signings to come.
Timu (20) has been training with the Highlanders over the pre-season and will start on the wing for the southern franchise in Queenstown tonight.