A lecturers' union is warning of an "anti-Muslim McCarthyism" after reports that university staff are to be encouraged to inform on students.
Unions warn the document risks "demonising Muslims"
A leaked report suggested government guidelines for universities on tackling extremism would encourage staff to inform on students to Special Branch.
The Guardian obtained a copy of the document and said it urged close attention be paid to Islamic groups.
The government said the document was still in the development stage.
And Communities Secretary Ruth Kelly denied it was about "picking on" individual students.
"It's about sensible monitoring of activities to make sure individual students on campuses are protected."
She said that the guidelines were still being worked out, in discussion with universities, and it was important to "strike the right balance".
The University and College Union (UCU) said it had several concerns.
One was that the guidance could be seen as stifling debate, another was that there was a danger of "demonising Muslims".
UCU joint general-secretary Paul Mackney said: "Members may be sucked into an anti-Muslim McCarthyism which has serious consequences for civil liberties by blurring the boundaries of what is illegal and what is possibly undesirable."
Fellow joint general-secretary Sally Hunt said discussion of ideas was the key to understanding.
"The last thing we need is people too frightened to discuss an issue because they fear some quasi secret service will 'turn them in'," she said.
The government announced in September 2005 that it was producing a document advising universities on watching out for extremists.
Universities UK, which represents vice-chancellors, has produced its own advice.
It said its main problem with the government version as it had been reported was its emphasis on Islamic extremism.
Its president, Professor Drummond Bone, said there were dangers in targeting one particular group.
"Not only is this unreasonable but, crucially, it could be counterproductive. The key to this is balance and discussion - and we have made this point repeatedly to ministers."
The Federation of Student Islamic Societies said it had worked with Universities UK on its guidance.
However, it said the government had not taken its concerns on board.
Head of student affairs Faisal Hanjara said: "The idea that university authorities have to spy on students is not going to build trust.
"There is also no substantial evidence that recruitment has been taking place at universities."
He added: "The irony is that we have evidence that the BNP and other right-wing extremists are active on campus."
According to the Guardian, the 18-page document acknowledges that higher education institutions (HEIs) will be anxious about giving information to Special Branch police.
It says: "Some common concerns are that institutions will be seen to be collaborating with the 'secret police'.
"HEIs may also worry about what Special Branch will do with any information supplied by an HEI and what action the police may subsequently take.... Special Branch are not the 'secret police' and are accountable."
The document claims Islamic societies have become increasingly political.
Under the heading "inspiring radical speakers", it says they have tended to invite more radical speakers on to campuses and suggests checks should be made on these speakers.
It identifies Muslims from "segregated" backgrounds as more likely to hold radical views than those who have "integrated into wider society".
It also claims students who study in their home towns could act as a link between extremism on campus and in the local community.
National Union of Students president Gemma Tumelty said: "Demonising and stigmatising student communities is no way to defeat terror.
"Indiscriminate monitoring of groups on campus assumes collective guilt. This will only fuel the racism and Islamaphopia that our society should be trying so hard to stamp out and also runs the risk of alienating those students who oppose terrorist attacks."
The Department for Education and Skills said it was continuing to work with higher education institutions to develop the guidance - which would be issued shortly.
"It would be pure speculation to say what it will include," a spokesman said.