In a position paper released last year, the Ministry of Fisheries said the rate of observed sea lion mortalities has "declined markedly in recent years".
The report says no fatality limit is necessary because the most recent research "strongly suggests" that the direct effect of fishing-related mortality on the New Zealand sea lion population is minimal.
But the Otago University study lists by-catch as a major cause of a 50 per cent reduction in pup numbers in the last 12 years in the sea lions' main breeding area around the Auckland Islands.
"That's the problem when you're talking about, as the National government often says, trying to get a balance between economic development and conservation," Ms Dyson said. "Actually, you can't have a balance in this case.
"Sea lions will become extinct if we don't stop this by-catch in some areas."
Ministry of Fisheries deputy director-general Scott Gallacher said in a statement that the Ministry aims to provide the most appropriate advice for risks to protected species.
"MAF is confident it has access to the most up-to-date and accurate research on sea lion by-catch in the squid fishery.
MAF is aware of other research done by Otago University and Department of Conservation staff and will consider it in any decision-making."