Otto was the fourth son of Holy Roman Emperor Louis IV by his second wife Margaret II of Avesnes, Countess of Hainaut and Holland.
The childless dukes Louis VI and Otto had already promised Charles the succession in Brandenburg in 1364.
These arrangements were considered revenge for a conflict with their brother Stephen II concerning the Bavarian succession after the death of Meinhard III of Gorizia-Tyrol, son of Louis V. Charles IV invaded Brandenburg in 1371, however, since Otto neglected his government.
Two years later Otto officially resigned in consideration of a huge financial compensation and retired in Bavaria.
He was accepted as nominal co-regent by his brother Stephen II, also as Otto also had been compensated by Charles with land in the former Bavarian Nordgau he now contributed.