Universities were compared across 13 factors in the areas of research, teaching, knowledge transfer and international activity.
In a surprise result, perhaps the world's best-known university, Harvard, was knocked off top spot for the first time in eight years by the much smaller and younger California Institute of Technology because of its consistent results and a 16 per cent rise in research funding.
The US dominated the rankings with 75 in top 200 and seven in the top 10, followed by The UK with 32 in the top 200, Netherlands and Germany with 12, Canada with nine and Australia with seven.
Auckland University's world-class academic staff, ability to attract high numbers of international students and funding levels all helped to secure its place, Mr Baty said.
While it was the only university in the country to make the top 200, several others were just under the 200 mark, he said.
New Zealand was also ranked 10th out of 20 the countries on the list comparing value for money at university and size of economy.
"The fact that New Zealand comes 10th in this table just shows that a focused approach to education can really pay off."
Israel was the only Middle Eastern country in the top 200 with Hebrew University of Jerusalem, 121st and Tel Aviv University, 166th.
Five universities in Japan were in the top 200 - more than any other Asian nation.
For the full Times Higher Education World University Rankings 2011-12 go to www.timeshighereducation.co.uk/world-university-rankings