The Auckland University of Technology also made significant gains - up 60 places to move into the top 450.
The QS (Quacquarelli Symonds) rankings assess universities across research, resourcing, graduate employability and internationalisation.
Chris Whelan, the executive director of Universities New Zealand, said the rankings are an extraordinary result and "something that New Zealanders should be proud of".
"We are the only country in the world to have all our universities ranked within the top 500. If you are a young New Zealander thinking about where to do a degree, you can be confident of getting a world-class education at any of our universities."
Whelan said an increased focus on high-quality research contributed to the success of New Zealand rankings.
"University vice-chancellors acknowledge that the government's increased investment in research funding in recent years has made a difference."
Despite an overall rise in this year's rankings, most New Zealand universities saw a small drop in their QS employer reputation scores.
Whelan said this did not reflect the employability of students.
"Ninety-seven per cent [of students] find employment and around 90 per cent are in degree-relevant employment within a couple of years of graduating."
He believed highly ranked universities are good for New Zealand.
"Other highly ranked universities want to collaborate with us on research. International students want to come and study with us."
AUT vice-chancellor Derek McCormack said it was pleasing to see AUT recognised for its international outlook.
"Our students gain cross-cultural experience dealing with the complexity of many people coming together from different backgrounds."
Tertiary Education Skills and Employment Minister Steven Joyce congratulated the universities.
He said international education was now New Zealand's fifth-largest export earner, earning $3.5 billion a year.
"One reason for that is our universities are among the best in the world and as a result we can offer students an outstanding education experience."
University of Waikato Vice-Chancellor Professor Neil Quigley says the continued rise in world rankings is a reflection of the University's ability to adapt to a changing global tertiary landscape and prepare students for a world outside university.
"We know what a significant part rankings play in the decision making process of students, particularly international students, and we are delighted to have QS rank the university in the top 3% of all universities worldwide" Professor Quigley says.
University of Canterbury's new Deputy Vice-Chancellor Research and Innovation Professor Ian Wright says the result shows the university is the "most research intensive teaching faculty of any New Zealand university".
"The University's cooperative strategy has paid off both financially and in research activity. UC's annual research income has surpassed $50 million, and that is a direct result of our strategy of working with other recognised research leaders," he says.
"University of Canterbury academics have also been recognised as the most research intensive faculty of any of New Zealand's eight universities."
The QS Rankings consider 3800 institutions worldwide and rank the top 916.
NZ's top universities:
• University of Auckland - 81
• Otago - 169
• Canterbury - 214
• Victoria - 228
• Waikato - 324
• Massey - 340
• Auckland University of Technology - 441-450
• Lincoln - 343
