Only five British universities are ranked in the world's top 50, according to an annual league table published by the Times Higher Education magazine.
Cambridge and Oxford are joint sixth, Imperial College London is ranked ninth, University College London is 22nd and Edinburgh is 40th, according to the 2010-11 World University Rankings.
The US dominates the table, with 72 institutions in the top 200, and all five top places, including Harvard at number one, California Institute of Technology at number two, and Massachusetts Institute of Technology in third.
But the UK, which has historically viewed its higher education sector as world-leading, has just 14 universities in the top 100.
Countries which have invested heavily in higher education, such as China, South Korea and Canada, are performing well, warned magazine editor Ann Mroz.
"Our rankings are the major global benchmark of worldwide university performance, used by academics, students and policymakers to make important decisions," she said. "They clearly show that investment in higher education does produce world-class universities, and those institutions that have performed well should be congratulated.
"Higher education funding is currently a matter of worldwide debate, and we urge those discussing the issue to remember the importance of a strong university system for excellence in research and teaching, and as a driver of the knowledge economy."
Last year British universities accounted for four out of the top 10, with eight in the top 50 and 18 in the top 100.
David Willetts, UK Minister for Universities and Science, said: "Our universities have demonstrated their worth against new more rigorous criteria.
"Reputation counts for less this time, and the weight accorded to quality in teaching and learning is greater."