The Higher Education Academy is to close its network of discipline-based teaching support centres and replace them with subject heads who will report to the HEA's headquarters in York.
Under the new structure, some 130 full-time equivalent (FTE) posts from across the HEA and its 24 subject centres will go - cutting staff numbers by more than half.
Craig Mahoney, the HEA's chief executive, said the new structure would be more efficient, with a higher proportion of resources spent on staff working directly with university teachers.
But subject centre staff described the plan as "a tragedy", and one centre director has already stopped participating in the HEA's senior management team meetings.
At the moment, 100 FTE staff are employed by the HEA in York. There are also about 150 more FTE staff working in the subject centres who are not directly employed by the HEA.
Under the new model, there will be a total of about 120 FTE staff who will all be employed by the HEA or seconded from the sector.
In an interview with Times Higher Education, Professor Mahoney said that his organisation, which faces losing a third of its core funding by 2012-13, was "vehemently committed" to continuing discipline-based work. But he argued that there was duplication between subject centres, particularly when it came to administration.
It was not an unreasonable criticism that the HEA had been "bureaucratic", he said, but this was the case not only in York but "across its entire network".
Under the new model, more of the HEA's income - about 75 per cent, against 50 per cent currently - will go to staff working directly with academics, he said.
The new subject heads will be expected to be "out and about" in the sector, but "will answer to and report to the single site", he explained.
The HEA will also have "academic associates" based in institutions around the country, and some ?2 million will be spent on consultancy days.
Professor Mahoney stressed that the 100 staff jobs in York will not automatically be incorporated into the 120 remaining posts. "I want the best people on board...This is not about protecting York jobs," he said.
The work of the subject centres will continue this academic year, but from September 2011 funding will be reduced and the new structure will be in place by summer 2012.
One subject centre staff member, who chose to remain anonymous, said the plan "would not work". "It won't get buy-in from the sector, and it will be met with a lot of anger," he said.
The staff member said it was "crazy" to abolish subject centres when the government was emphasising the need for good teaching and as students were set to become more demanding.
Noting that the HEA is "treated with disdain by most people in the community", he argued that, under the plan, it would be seen as "just another quango".
"For a government wanting to get rid of quangos it seems to be an unwise direction in which to move."