The study's author and psychiatrist Professor Roger Mulder said anti-psychotic medicines were meant for treating people with schizophrenia and bipolar disorder.
"But the most common group, actually, in terms of frequency was European women over 65 years old," he said.
"And so what we think … is that a lot of the increase isn't because people are getting increasingly anti-psychotic.
"But it's that the drugs are being used off-label for other indications - to help sleep, to help anxiety, to help tranquilise people."
The increase in anti-psychotic medicine use was occurring around the world, and was not necessarily a bad thing, Mulder said.
The drugs can have significant side effects, including weight gain and changes to blood sugar. But the side effects are related to high doses of the drug, and people who are using them for insomnia or anxiety are likely to be on a lower dose.
"We don't know whether they can cause the same problems at low doses - though a few reports say they can," Mulder said. "It's something that needs looking at."
The Ministry of Health's chief adviser on mental health John Crawshaw welcomed the new research, saying the rise in prescriptions was a complex and concerning issue in New Zealand.
Carefully monitored use of anti-psychotics worked well for many people with schizophrenic or bipolar disorders, he said, but there was a shared concern about possible over-reliance on drugs to treat these conditions.
Crawshaw said a major Government-led review of the mental health sector would provide some guidance in this area.
Medical watchdog Medsafe says there is no legal barrier to "off label" medicine use, as long as the prescribing doctor follows ethical codes and patients are informed.
The Otago study found there was no rational basis for the prescribing of anti-psychotics in New Zealand. Rates of prescription varied between regions and ethnicities.
"Which suggests it's not just medical factors that are driving this prescription – there might be other factors as well," Mulder said.
One of those factors could be the way the drugs are marketed by their manufacturers.
The biggest growth in usage rates were for what are known as atypical, or next generation anti-psychotics, especially quetiapine and olanzapine.
Pharmaceutical companies have been taken to court in the United States for promoting off-label use of medicines like olanzapine.
"In New Zealand, we don't have any evidence of this," Mulder said. "But certainly in the States, they are not allowed to market it off-label or to present it as being effective without trials being done.
"I think there's no doubt that pharmaceutical companies have influenced prescriber choices and I think they've probably, certainly in the past, encouraged off-label."
The rise of anti-psychotics
• 501,000 prescriptions in NZ in 2015
• 2.8 per cent of NZ adults prescribed anti-psychotics in 2015, up from 1.8 per cent in 2008. This compares to 1.7 per cent in Australia.
• Highest rate of anti-psychotic prescriptions was for European women over 65 (3.38 per cent)
• The biggest growth in usage rates was for olanzapine and quetiapine
