Ministers will allow institutions to admit unlimited numbers of bright students gaining the equivalent of one A and two B grades at A-level, it emerged.
The change – from September 2013 – is expected to lead to an expansion of places at elite Russell Group universities.
But the move is likely to seriously hit many mid-ranking institutions who face losing thousands of bright students to more prestigious rivals.
Today, lecturers’ leaders criticised the reforms, saying they represented a “triumph of ideology over evidence based policy-making”.
But Wendy Piatt, director general of the Russell Group, which represents institutions such as Oxford, Cambridge and University College London, said the move would “allow universities with high demand from highly qualified candidates to accept extra students if they wish and protect them from cuts in their student numbers”.
Vince Cable, the Business Secretary, said: “These changes will enable more high-achieving students to get into their first choice university.”
The Government has previously exercised tough controls over the number of students that each university can recruit to limit the cost to the taxpayer of putting too many young people through higher education.
Last year, 19 universities were fined a total of £8m for recruiting too many students.
For the first time this year, ministers are lifting these controls to create more competition between universities.
It has already been announced that institutions will be allowed to admit unlimited numbers of students who gain two As and a B at A-level.
This coincides with a decision to dramatically raise the cap on tuition fees from £3,375 to £9,000-a-year for students starting courses in September 2012.
The move will benefit around 85,000 students who are expected to gain top A-level grades this year – giving them greater choice between universities.
On Friday, the Government announced that number controls will be further liberalised in 2013, when universities are allowed to recruit as many undergraduates as they wish with ABB grades.
It is expected to benefit another 35,000 students – taking the total number of students outside the Government’s strict controls to 120,000.
The Telegraph understands that a series of Russell Group universities have already registered initial expansion plans, including several large red brick institutions in major English cities.
Separately, the Government has also announced that it is expanding the number of places available at cheap universities – those charging £7,500 or less – to keep down the total student loans bill. Some 5,000 extra places will be available at cut-price institutions in 2013.
David Willetts, the Universities Minister, said: “We are rolling back the controls on places at individual universities that have been a barrier to competition. Students will gain as universities attract them by offering a high-quality academic experience.”
But Sally Hunt, general secretary of the University and College Union, said: “It seems very premature for the government to extend its AAB policy when we have yet to see the impact of it. This looks like the triumph of ideology over evidence based policy-making.”