Otama remained in service until late 2000; a delay from her original planned decommissioning date to help attenuate the problems with the replacement Collins-class submarines.

Otama was sold to the Western Port Oberon Association in 2001, which planned to preserve her as a museum vessel as part of the proposed Victorian Maritime Centre.

[8] After a multi-year refit was completed in 1985 by Cockatoo Docks & Engineering Company, Otama was upgraded to carry United States Navy Mark 48 torpedoes and UGM-84 Sub Harpoon anti-ship missiles; the last Australian Oberon to undergo the Submarine Weapon Update Program.

[11] Otama was laid down by Scotts Shipbuilding & Engineering Company at Greenock, Scotland on 25 May 1973, launched on 3 December 1975, and commissioned into the RAN on 27 April 1978.

[13][19] After a delivery voyage via ports in Denmark, Florida, and Mexico, Otama arrived at HMAS Platypus in Sydney on 15 December 1978.

[20] During the Cold War, Otama and Orion regularly deployed on surveillance and spying operations using their specialist intelligence-gathering equipment, earning them the nickname "Mystery Boats".

[19][21][22][23] These activities starting in 1978 were part of the broader Western nations' intelligence-gathering apparatus, and included surveillance off the coasts of Vietnam, China, India and Indonesia.

Obtaining intelligence on Soviet and Chinese made vessels in operations in the Indian Ocean and South China Sea.

[25] The Squadron, which included HMA Ships Melbourne, Perth, Derwent, Stalwart, and Supply spent two months in the Indian Ocean as part of a flag-showing cruise; the largest RAN deployment since World War II.

[27] The submariners, on noticing their vessel diving underneath them, climbed up the fin to the bridge and opened the voicepipe in an unsuccessful attempt to contact the control room before being washed overboard.

[30] A coronial inquiry followed (one of the first heard by the new office of the State Coroner of New South Wales), to which there was some opposition by the RAN, including advising personnel not to cooperate with the task force gathering evidence for the inquiry, and attempting to fend off a request by the coroner for a trip on the submarine replicating the events of the day.

[34] From 1996, Otama was given approval to conduct coastal surveillance operations using its specialist intelligence-gathering equipment on Indonesia in particular to obtain information on East Timor.

[39] The submarine was sold in 2001 to the Western Port Oberon Association, a community group intending to preserve her as a museum vessel and building the Victorian Maritime Centre in Hastings, Victoria.

[16][42] The grant included the $50,000 purchase price of the submarine, plus $300,000 to tow Otama from Fremantle to Western Port Bay, with the balance to be used in bringing the boat ashore once a suitable venue was built.

[40][41][44] As the Western Port Oberon Association could no longer afford to maintain the submarine while waiting for a favourable decision, Otama was listed on eBay for sale in November 2008.

[41][45][46][47] Although no bids were placed by the time the online auction closed in late December, the association received several expressions of interest: including from the St Kilda Marina, Frankston City Council, and one purporting to be a tourism operator but believed by the Western Port Oberon Association to be wanting to restore the submarine for drug smuggling (which was referred to the Australian Federal Police and the Australian Security Intelligence Organisation).

[43] The association submitted plans in June for a 2.5-hectare (6.2-acre) site on the seawall of the Western Port Marina at Hastings, to be built on reclaimed land.

On 13 September 2022 the semi-submersible vessel, Rolldock Sun hired by the Department of Defence arrived in Western Port Bay to uplift Otama for transfer to Henderson, WA and breaking up.