University groups are warning that tighter visa rules, claimed to be under consideration by the Home Office, would cut overseas student numbers by 15%.
The proposals are believed to include tougher English language requirements for students.
Dominic Scott, head of the UK Council for International Student Affairs, said it would be a "nail in the coffin" for recruiting overseas students.
The Home Office has argued there are no limits on numbers of genuine students.
Universities have already been lobbying ministers to remove overseas students from migration targets - but the new English language proposals, if they were given the go-ahead, would mean even an higher threshold for entry.
Universities argue that overseas students are increasingly important to the UK economy and that raising more barriers sends out a negative message in this competitive global market.
Universities UK says overseas students are worth £7bn to the UK each year.
Mr Scott, head of the advisory body on international students, described the revised language requirements as "pretty extreme".
He warned that if implemented they would have a "massively damaging effect" on universities wanting to recruit overseas students, preventing about 15% of the current intake from gaining visas.
Mr Scott said universities of all kinds saw the proposals as a "major concern" and would be asking for evidence there was a problem with students with poor language skills.
He said the tougher language rules could make it difficult to recruit for pre-degree courses and science and maths subjects, where students might have very advanced skills but weaker English language ability.
The move by the Home Office follows a speech on controlling immigration by Prime Minister David Cameron in May.
"We must go further on curbing abuse, shutting more bogus colleges, being more robust with institutions that have high rates of students overstaying and looking to toughen English language requirements for students," he said.
Mr Cameron said tighter control of migration would not "stop us from rolling out the red carpet for the brightest and the best: the talented workers and brilliant students who are going to help Britain succeed".
"As I've said before, no cap on the number of overseas students who come and study at our universities," said the prime minister.
The university sector has been campaigning for overseas students not to be part of this drive to reduce migrant numbers.
A recent report from the Parthenon consultancy group said a potential extra 80,000 jobs over the next four years were being lost because of the current regulations on overseas students.
For every overseas student in the UK, the equivalent of 0.6 of a job was created, driven by spending such as fees, accommodation, travel and entertainment.