Departments that did badly in the research assessment exercise will not have their PhDs funded under plans being developed by the English funding council.
The move would further concentrate PhD places in research-led institutions. At present, five institutions award a quarter of all doctorates. The remaining doctorates are awarded by more than 100 institutions.
It would affect more than 400 departments and would particularly hit subjects such as environmental science and nursing, where almost half of all departments would lose any funding to award PhDs.
As part of a drive to improve standards in postgraduate research programmes, the Higher Education Funding Council for England is to draft minimum standards for universities to receive public funds for postgraduates.
To have publicly funded PhD students, a department would have to gain at least a 3a or above, indicating that its research is nationally excellent in more than two-thirds of the areas assessed.
Students have welcomed the plan to raise standards but have expressed concern about how to put it into practice.
Tim Brown, general secretary of the National Postgraduate Committee, said:
"Many institutions may be gaining high scores with regard to their RAE rating but this says very little about their ability to teach and equip research students.
"From our experience, it is often the case that the lower-scoring research centres are providing better training and creating a better environment for research."
The English funding council also plans to insist on departments having a critical mass of active researchers and other postgraduates. It suggests that students should have "effective interactions" with at least five research-active staff or postdoctorates.
Smaller groups could achieve this by developing collaborations within and outside the university. It suggests that for nursing research or art and design, it might be necessary to develop collaborations at a national level to achieve critical mass.
Hefce also wants universities to offer library and IT facilities of a national standard. The opportunity to acquire skills for employment outside academia and other minimum standards for research activity would also be required.