Universities will face renewed pressure to sell shares in tobacco companies following the success of a student campaign to persuade Edinburgh University to disinvest in the industry.
Edinburgh's decision comes amid a growing public debate north of the border over smoking and public health.
Scottish Executive ministers voted unanimously this week to ban smoking in all enclosed public spaces.
Steve Cockburn, president of Edinburgh's students' association, said: "I know students in other universities are campaigning for ethics to be at the heart of investment, and I hope Edinburgh's experience gives some hope that it is achievable and provides an example to follow."
Tanith Muller of the British Medical Association Tobacco Control Resource Centre said: "We are delighted that Edinburgh University is dissociating itself from the tobacco industry's cynical trade in death. We would encourage other universities to follow this example."
An Edinburgh spokesperson said the university court adopted a policy on socially responsible investment last year. The decision was formalised after consultation with university trustees.
Students argued that there was a conflict between the university's medical research and its shares in companies such as British American Tobacco.
Not all universities agree, most notably Nottingham University, which accepted £3.8 million from BAT three years ago to create an international centre for corporate social responsibility.
Other universities owe their existence to tobacco money. The University College of Bristol, now Bristol University, opened in 1876 with the help of the Wills family, who made a fortune from tobacco.