The University of Canberra has been ranked in the 401-500 band in the 2016-2017 THE World University Rankings, up from last year's position in the 501-600 band. This achievement places UC as the 24th ranked institution in Australia, up from 28th last year.

The ANU remains in second place behind The University of Melbourne.

Acting Vice-Chancellor of ANU Professor Marnie Hughes-Warrington said the ranking was a great outcome for ANU.

"It's the result of the great work done every day by dedicated researchers and teachers at ANU, who strive to ensure ANU continues to be counted among the world's great universities," Professor Hughes-Warrington said.

"While the improved ranking is a cause for celebration, the ANU is aware that rankings can be an imperfect measure of a university's performance. However, ANU takes great pride on being a resource for the entire nation."

University of Canberra Vice-Chancellor Professor Deep Saini said it was very pleasing to see the University's growing reputation in research and teaching, in addition to its increasing international outlook, were recognised in these rankings.

"The University of Canberra is only 26 years old and this is fantastic recognition of its outstanding achievements in its very young history," Professor Saini said.

"Our education and research performance has continued to rise sharply in the past few years and we are committed to continue working hard to ensure we keep improving in the years to come."

According to the report, due to be released around the world on Thursday, Australia took out 23 places in the world's top 400 universities.

The nation's oldest tertiary institution, the University of Sydney, dropped from 56 to 60 this year, tying with the University of Queensland, while its Sydney rival UNSW moved up four places to 78.

For the first time in the ranking's 13-year-history the University of Oxford took out top spot, knocking off the California Institute of Technology which has held the crown for the past six years.

The Times ranking system relies on surveys completed by academics as well as the number of research citations per academic. It attempts to take into account teaching quality by measuring factors such as the number of doctorate students to bachelor students.

Phil Baty, the editor of the Times Higher Education World University Rankings, said Australia's ranking success cannot be guaranteed in the long-term while more of Asia's leading universities join the top of the list.

"Australia will have to watch out for Asia's continuing ascent. The higher education superpower has two new entries in the top 100 and a further four institutions joining the top 200," he said.

China now has two top 40 universities, while the National University of Singapore, at 24th – comes in ten places higher than Australia's top tier Melbourne University.

The statistics will worry the Australian international student market, now the country's third biggest export worth nearly $20 billion a year.

"Australia is a key research partner for many Asian universities so the nation can capitalise on the region's success, although it may find it harder to attract top Asian students and academics," said Mr Baty.

The warning was echoed by federal Education Minister Simon Birmingham.

"While these results are positive, we must continue to foster excellence and innovation in our universities to remain internationally competitive," he said.

UNSW's Deputy Vice-Chancellor of Research, Nicholas Fisk said universities were just as likely to be competing with institutions down the road as they were with ones thousands of kilometres north.

"The competition is completely global these days. Good research is done by large interdisciplinary teams, all the centres of excellence have nodes in other universities in Australia. It is a very international outlook," he said.

"These days there are more and more universities on the list and with the huge rise in East Asian universities, even staying still is a huge achievement."

The Group of Eight, which represents Australia's top eight ranked universities, said the rankings should be a reminder about the importance of research funding as the federal government stalls on university funding reform.

A $3.2 billion "zombie" university funding cut has remained in the Turnbull government's budget with little hope of passing the Senate after twice being rejected.

"If Australia's leading research intensive universities cannot in the future maintain their excellent rankings, then Australia will take an economic and jobs hit that the nation can ill afford," said Go8 CEO Vicki Thomson.

"This is why the Go8 continues to be vocal about the need to ensure our research is sustainably funded because that is the foundation of future success," she said.

With Eryk Bagshaw