The hike was only half as much as the board's finance committee proposed earlier in the day and came after students called for a tuition freeze.
The lower hike was championed by Ralph Izzo, chairman of the university's board and the president and CEO of Public Service Enterprise Group.
"I don't think this is a financial issue as much as it is a signal that we recognize the situation we're in," Izzo told the board.
Reducing the tuition increase at the last minute means the university's administration will have to cut about $12 million in spending from the budget of more than $2 billion that was also approved Thursday.
"This will cut millions of dollars that were needed for important priorities," said Nancy Winterbauer, a Rutgers vice president in charge of the budget. Still, Rutgers President Richard McCormick said he would abide by the board's decision to keep tuition increases smaller.
University officials say they're in a financial crunch.
The state government's subsidy was held at the same level as last year's - which is to say about 15 percent less than it was in the 2009-10 academic year.
University faculty, staff and student activists have joined together to lobby not only for smaller tuition hikes, but also for raises for university employees.
Unions for the employees agreed to give up raises two years ago.
But with no state funding for raises, the university has continued the salary freezes since then. An arbitrator is weighing whether those freezes violate the workers' contracts.
More than two dozen people spoke at Thursday's board meeting as more chanted and blew horns during a rally outside the administrative building on the school's New Brunswick campus.
Many of them decried what they see as excessive spending on top administrators and the school's athletic department.
Under the budget adopted Thursday, the in-state tuition, which varies by school, will rise by an average of no more than 1.8 percent from last year's undergraduate level of just under $10,000.
Tuition for out-of-state students will jump by about 5 percent. Out-of-state undergraduates last year paid nearly $22,000 in tuition.
Fees are to increase 1.6 percent, and room and board costs will rise 3.3 percent.
University officials said their original proposal - which was rejected as too costly for students - would have raised the average student costs by about 3 percent, as low as it's been in the past decade.
As part of the budget, a financial aid fund was also increased $5 million to $27 million.