The Tertiary Education Commission confirmed on Thursday that 70 positions will be axed and its regional offices outside Wellington and Auckland are to close.
Staff were told on Thursday afternoon of a significant restructuring of the organisation.
The comission is the main agency for managing relationships with the tertiary sector and for policy development, its website says.
TEC is responsible for funding the Government's contribution to tertiary education and training offered by universities, polytechnics, wananga, private training establishments, industry training organisations and adult and community education providers.
The announcement has brought swift criticism from the Public Service Association, which says the loss of a sixth of the commission's workforce is at odds with the Government's demands for value for money and a stronger focus on frontline services.
The union says the decision to close regional offices in Christchurch and Rotorua means the commission will not have a presence in the South Island.
Association national secretary Brenda Pilott says staff are upset and concerned. She says they are the first casualties from the Government's drive to cut costs in the public service and are a sign of more to come.
But commission chief executive Roy Sharp says the restructuring will create a much more efficient and effective organisation.
Dr Sharp says the commission will make organisations which need extra help a priority.