From next year, Britain will no longer fund the Commonwealth Scholarships for students from developed countries.
About 25,000 students have won the scholarship since it was instituted in 1959 and many of those returned to their homelands to play leading roles in cultural, intellectual and political life.
About five New Zealanders were chosen each year and previous scholars include deputy prime minister Michael Cullen, law commissioner Prof John Burrows and University of Otago science communication director Prof Lloyd Davis.
Prof Davis, who won the scholarship in 1978, said it had enabled him to study the behaviour of ground squirrels for his PhD.
The experience had given him new ideas and exposure to different ways of teaching.
"It changed my life - it was the single most important moment of my academic life.
"I think it's very sad the scholarship will stop because it provides the opportunity for students of high calibre to taste different parts of the academic palette.
"It's an enriching experience."
Since returning to New Zealand, Prof Davis has become an internationally recognised scientist, award-winning author, a filmmaker and has won the Fulbright Fellowship, an Anzac Fellowship and a Prince and Princess of Wales Science Award.
Auckland University of Technology vice-chancellor Derek McCormack said the decision was a major blow for the country.
"These scholarships have had a big impact on New Zealand over the years in its development."
University of Auckland deputy vice-chancellor Raewyn Dalziel said the vice-chancellors committee expressed its opposition to the Commonwealth Scholarship Commission.
She said the committee was "disappointed that this step was taken".
"It was presented pretty much as a fait accompli to New Zealand, Australia and Canada.
"It reflects the changing nature of the Commonwealth and the decline in its meaning for the former dominions."
The change has also been criticised by outspoken Australian feminist academic and writer Germaine Greer.
"For two million miserable pounds - the cost of a basement flat in Bayswater - England has the advantage of 500 of the best that could be harvested from Commonwealth universities.
"In simply deciding that the Commonwealth Scholarship had not been worth the minute outlay, [Secretary of State for Foreign and Commonwealth Affairs David] Miliband has done something extraordinary.
"Of all the investments this unfortunate Government has made, this is one that has produced a profit that can be measured exponentially . . . one that goes on and on."
- Additional reporting The New Zealand Herald/ NZPA
