Otto was born in Klosterneuburg as the fifth son of Leopold III, margrave of Austria, by his wife Agnes, daughter of the emperor Henry IV. By her first husband, Frederick I of Hohenstaufen, duke of Swabia, Agnes was the mother of the German king Conrad III and grandmother of the emperor Frederick I. Otto's sister, Judith or Ita, was married to Marquess William V of Montferrat. Otto was thus related to the most powerful families in Germany and northern Italy.
The records of his life are scanty and the dates somewhat uncertain. He studied in Paris, where he took an especial interest in philosophy. He is said to have been one of the first to introduce the philosophy of Aristotle into Germany, and served as provost of a new foundation in Austria.
Having entered the Cistercian order, Otto convinced his father to found Heiligenkreuz Abbey in 1133, thus bringing literacy and sophisticated agriculture (including wine making) to the region that would become Vienna. He became abbot of the Cistercian monastery of Morimond in Burgundy about 1136, and soon afterwards was elected bishop of Freising. This diocese, and indeed the whole of Bavaria, was then disturbed by the feud between the Welfs and the Hohenstaufen, and the church was in a deplorable condition; but a great improvement was brought about by the new bishop in both ecclesiastical and secular matters.
In 1147 Otto took part in the disastrous Second Crusade. The section of the crusading army led by the bishop was decimated, but Otto reached Jerusalem and returned to Bavaria in 1148 or 1149. He enjoyed the favour of Conrad's successor Frederick I, was probably instrumental in settling the dispute over the duchy of Bavaria in 1156, and was present at the famous diet of Besançon in 1157. Still retaining the habit of a Cistercian monk, he died at Morimond on 22 September 1158. In 1857 a statue of the bishop was erected at Freising.