The Royal Society is calling for a new UK Space Agency to replace the existing British National Space Centre.
The UK could be involved in many more activities, the society says
It says there is currently a lack of funding and authority to represent the country's space interests on the international stage.
The society claims valuable commercial opportunities are being lost to other countries with stronger, more high profile space agencies.
The government is at present engaged in a review of UK space policy.
The comments from the Royal Society will be fed into this process.
Martin Rees, President of the Royal Society, said: "A UK Space Agency would have the authority to implement a national space strategy and raise the profile of scientists and industries working in the space sector.
"It would essentially provide a 'one stop shop' for UK space science activities."
UK 'losing out'
In addition to providing a hub for activities within the UK, the society argues that a national space agency would play an important role internationally, to promote the UK's expertise and 'broker' deals with other national bodies and initiatives, a current example being the European Space Agency's (Esa) programme on robotic space missions.
The UK only plays a minor role within Esa's space initiatives and last year contributed just 7% of Esa's total budget compared with 25% from France and 20% from Germany.
Britain has not been the prime contractor on a major European mission since the Giotto probe was sent to Halley's Comet in 1986; and it is not scheduled to be one again until 2009 when the Lisa Pathfinder mission launches test technology for an orbiting gravitational wave observatory.
An effective UK Space Agency would need a significantly increased budget, the Royal Society said.
"A national space agency would promote the UK's strengths and foster international collaboration," observed Professor Rees.
"The UK is recognised as a world leader in the development of low-cost satellite technology. However, no European country can afford to go it alone; and collaboration is a cost effective means for the UK - which currently constitutes a small but specialist component of the global space community - to be involved in high-profile projects.
The UK is the prime contractor on the Lisa Pathfinder mission
"The global space industry is worth $115bn (£55bn) per year; the UK, both independently and through Esa, should be competing for contracts with the likes of Nasa and the emerging space powers such as Brazil, China, India and Russia.
"The UK has a great deal of expertise, but it is losing out as other national space agencies work harder for their industries and scientists."
Last week, the British National Space Centre (BNSC) and Nasa signed a document of understanding.
It will see a joint team established to examine the prospects for collaborative lunar robotic projects. It raises the prospect that more UK-built science instruments could be flown on US missions.
The BNSC coordinates UK civil space activities, but does not have the power to implement national space policy, nor a formal budget.
Currently, eight government departments, including Defra, the DTI and the MoD have interests in space science. However, no department holds overall responsibility for policy.
The UK's industrial space sector has long been dissatisfied with this arrangement and is running "The Case For Space" campaign to persuade government to make changes.
"I'm not sure they fully appreciate what we do," John Auburn, the chair of trade body UKspace, recently told BBC News.
"The problem in the UK is that responsibility for space is split between so many different departments, we don't have a joined up policy for space. It's a structural problem that could be significantly improved."
The industry turned over £4.8bn last year and employs one of the country's most highly skilled workforces.
A British National Space Centre spokesperson said: "Clearly there are going to be advantages and disadvantages to any organisational form.
"As a partnership of government departments and research councils with an interest in space, the BNSC combines the best points of, on one side, a space agency which offers a holistic focus across various space activities and, on the other, a fully devolved arrangement which gives strategic ownership to the lead department.
"BNSC plays a central role in European space activities. Unlike many other countries, we are highly selective in the activities that we participate in, focusing on those which will bring the greatest benefits to the UK.
"Of course no organisational form is permanent, and the government remains open to ideas to improve the current arrangements."
Science minister Malcom Wicks is expected to come forward with a new UK space strategy in the Autumn.