Sir David Watson, professor of higher education and principal of Green Templeton College, Oxford, said policymakers were ignoring the fact that researchers were increasingly working across institutions and national borders.
In a speech due to be delivered at the annual conference of the Society for Research into Higher Education, of which he is honorary president, on 7 December, he said that there was already a "stark conclusion" that funding had been concentrated in the UK "to the point where it has become dysfunctional".
But the issue was also reinforcing an obsession - among vice-chancellors, politicians and funding bodies - with institutional competition, rather than with the real world of partnerships.
"As university leaders, policymakers and funders focus on league tables and so-called competitive advantage, they are actually being undermined by the scientific community's ever-increasing tendency to cross boundaries," Sir David said.
He added that the issue should prompt the UK to think "long and hard" about the upcoming research excellence framework, which seemed destined to continue "hyper-concentration" of quality-related (QR) funding and entrench a two-tier system.
As well as stopping universities from reaching the top tier and discouraging cross-institutional partnerships, such a system represented "a counsel of despair" based on the view that "the best of what we have now is the best we can ever hope for".
Sir David suggested that those with the lion's share of public funding might suffer as their research missions became narrower and dominated by science and medicine.
Meanwhile, those outside "the inflexible and backwards-looking QR winners' circle" would face major challenges, although they could succeed if they adapted "to a world of wider and deeper collaboration".
The theme of a mistaken focus on individual universities was carried through other parts of Sir David's lecture, including an attack on the attempt by league-table compilers to compare institutional performance.
"At present, both politicians and institutional leaders - the latter should know better - are obsessed with a poorly designed concept of comparative 'world classness' when they ought to be talking about geographically specific 'engagement'," he said.
Sir David said governments seemed to want higher education to achieve a variety of goals, such as social mobility and teaching quality, while referring to league tables that failed to measure any of these factors.
He also pointed to other "category mistakes" that prevent a proper analysis of problems, such as confusing reputation for quality and fair access for widening par- ticipation.
These suggested that higher education research itself also needed to "put its own house in order" and do more to combat such misunderstandings.
"In addition to telling truth to power - or at least the policymakers temporarily in charge - we need also to focus on telling the truth to ourselves," Sir David concluded.