As grandson of George of Bavaria, the young Otto Henry became Count Palatine of the new duchy of Palatinate-Neuburg after the Palatinate had lost the Landshut War of Succession against Albert IV, Duke of Bavaria.

After the so-called Kölner Spruch (Verdict of Cologne) the duchy was created from the territories north of the Danube for Otto Henry and Philipp, the sons of Ruprecht of the Palatinate.

In 1541 elector Otto Henry converted to Lutheranism and his palace chapel at Neuburg Castle was the first newly built protestant church of all, consecrated on 25 April 1543 by the reformed theologian Andreas Osiander.

Otto Henry ordered upgrading of Neuburg Castle, patronised the arts[3] and was involved in several conflicts, due to his expensive holding of court a huge burden of debts caused his bankruptcy until he inherited the Electoral Palatinate in 1556.

In September 1546 Neuburg was occupied by the troops of Charles V, Holy Roman Emperor as Otto Henry had supported the Schmalkaldic League.