The prime minister has made science an economic priority
English universities with a heavy involvement in science have had funding protected - at the expense of the social sciences, arts and humanities.
Almost £8bn has been divided up by the funding council (Hefce) for 2009-10, 4% more than last year, including £4.8bn for teaching and £1.5bn for research.
Research grants reflected the recent assessment exercise, prioritising departments with the best work.
But some prestigious universities have seen their share of funding cut.
Conversely, some of England's newest universities, along with many university colleges and specialist institutions, were better off for having improved their research performance.
The GuildHE organisation which represents them welcomed the decision.
"The announcement today is a just reward for academic colleagues in institutions that do not claim to be research-led; many of whom had made significant strides forward in research excellence on the basis of very limited financial support," it said.
Diana Warwick, chief executive of vice-chancellors group Universities UK, said: "We are pleased with this recognition of the world-class strength of the UK's research base, though we also note that some institutions face funding challenges as the result of changes in research allocations."
The London School of Economics (LSE) saw its overall grant for research and teaching drop by 0.8% with research funding cut by more than 13%.
In a statement, the LSE said it was "disappointed" as its performance in the research assessment exercise had been "outstanding".
"The LSE is a victim of the Hefce funding formula which implements government policy to protect the Stem subjects (science-medicine, technology, engineering and maths) at the expense of social sciences, arts and humanities," it added.
In the non-Stem areas, faculty and student numbers had grown more rapidly, and the potential for small pockets of research excellence was greater.
The rector of Imperial College London, Sir Roy Anderson, said he was "reassured" the leading universities were the main recipients of research funding - but noted their share of these funds had declined.
Sir Roy said: "At a time when the UK is looking to its science, technology and medicine powerhouses for ideas and innovations to help lead the economic recovery, it can't have been intended that we could be reducing the share of, and in many cases, actual, research funds to institutions which have demonstrated sustained excellence across successive research assessments."
He added: "It is surprising that Imperial College London, ranked top of all UK institutions for its proportion of research judged world-leading or internationally excellent should suffer a real decline in its allocation of research funding."
Universities secretary John Denham described Britain's university sector as "world class".
"The government is committed to ensuring that it remains so through a well-funded, successful and independent higher education sector," he said.
But his Tory shadow, David Willetts, described the cut in funding for some of the leading institutions as "a mess of ministers' own making".
"It is the wholly predictable result of their policy to spread money too thinly and it is a great pity that our world-class institutions like Imperial and the LSE have lost out, especially when we need them so badly at tough times like this," he added.