Otto was the son of Count Henry IV of Waldeck and his wife Adelaide of Cleves.
However, Otto III's younger brother William II managed to secure the Principality of Lüneburg.
On 8 July 1358, Otto, who was still reeling from the plague epidemic of 1349, commissioned the Knights Hospitaller at Wiesenfeld (now part of Burgwald to establish a hospital in Niederwildungen.
In 1368, the Archbishop of Mainz and the Landgrave of Hesse formed an alliance against Otto II and his son Henry VI, to take his castle at Wildungen.
A tribunal convicted the counts of Waldeck of violating their covenant with Mainz and ordered them to pay damages.