The body overseeing UK astronomy and physics is to commission an independent review of its operations.
The probe into the effectiveness of the Science and Technology Facilities Council (STFC) follows widespread concern over the status of its budget.
The council says its settlement from government has left it no choice but to find £80m of savings through to 2011.
This puts at risk a number of current science projects and the recent growth in research grants.
An assessment of where the STFC's yearly half-a-billion-pound budget should be focussed is currently under way and will be published next month.
Disciplines such as solar-terrestrial physics, which studies the connection between the Sun and Earth, fear they will be subjected to major cuts.
The announcement on Tuesday of the independent review was made as the government responded to MPs' misgivings over the activities of the STFC.
In April, the Innovation, Universities, Science and Skills Committee had criticised the STFC for not consulting the scientific community adequately. It also said that some of the council's decisions - particularly on the issue of membership of international science programmes - had left the UK looking like an "unreliable" and "incompetent" partner.
STFC BUDGET ALLOCATION
The government, in its formal response, acknowledged a number of the committee's observations but robustly rejected others. It disagreed with the notion that ministers had been trying to "micromanage" some programmes and described the MPs' criticism of the STFC's peer review system as "unhelpful and damaging".
"Government funding for science has more than doubled over the last decade, rising to more than £4bn by 2010/11," a spokesman in the Department for Innovation, Universities and Skills (DIUS) said.
"While it is right that government sets the overarching strategy, the research community and scientists themselves set priorities and distribute funds through a process of peer review."
One of the explanations the STFC has given for its current predicament is the move towards the funding of university research grants at their "full economic cost" (FEC).
This means that grants now take into account lab space, lighting, heating, technical support, etc. In the past, universities covered these costs, effectively subsidising research.
The MPs, in their report, said the government should have put extra money into the STFC settlement to cover FEC.
In its response, the government said: "[The committee] is entitled to argue that there should have been an even bigger increase but the government regard that an average increase of 2.7% per year in real terms [in the science budget] over the next three years is a strong settlement in a tight fiscal environment."
Committee chairman Phil Willis commented that he would have liked to have seen a clear commitment to hold off any cuts until the Wakeham Review into physics funding reported its findings in the Autumn.
"I am somewhat disappointed that the government has shelved responsibility for the whole affair to the STFC," he told BBC News. "But to balance that, I am pleased with the general tone of their response - that they accept that all is not well at the council, and that they have put the chief executive and the board on notice."
The independent STFC review will also report in the autumn.