Funds have been cut to the National Union of Students (NUS) as the government stops engaging with the organisation over recent anti-Semitism allegations.
The NUS will now be removed from all Department for Education groups and replaced with alternative student representation.
The government said the student panel of the government-backed Office for Students could be an alternative - or direct engagement with individual student unions.
The Minister for Higher and Further Education, Michelle Donelan, has written to the NUS, the NUS President, and the NUS oversight body for more information.
Ms Donelan said: "Enough is enough. I’ve prepared a package of sanctions against following concerning incidents over many years.
"Disappointed it has come to this but proud to stand up for Jewish students."
The government said the NUS had responded to the government's concerns but it will need to take "substantive action" to rectify the issue.
Education Secretary Nadhim Zahawi said: "I am seriously concerned to hear of so many reports of alleged antisemitism linked to the NUS.
"Jewish students need to have confidence that this is a body that represents them, and we need to be sure that the student bodies that we engage with are speaking fairly for all students, which is why we are disengaging with the NUS until the issues have been addressed.
"From the NUS’s initial response to our concerns, I am confident that they are keen to take action and welcome further updates from them.
"Antisemitism has no place in our society and we will stamp it out, wherever it occurs."
The National Union of Students (NUS) said it has launched an independent investigation following a complaint about antisemitism and is working in collaboration with the Union of Jewish Students (UJS) “every step of the way”.
An NUS spokesperson said: “We are disappointed that the universities minister has press released that the DfE will be disengaging with NUS rather than seeking to engage with us directly.
“Following a complaint about antisemitism we launched an independent investigation.
“We will be appointing a QC, in consultation with UJS, next week.
“We have sought to undertake the investigation in a serious and proper way, and are working in collaboration with the Union of Jewish Students at every step of the way.
“Once the QC has been appointed we will be able to update on the process and timeline. We look forward to working with the government constructively on this matter.”