Small colleges will be forced to merge with larger third level institutions, and universities and Institutes of Technology will have to band together into regional clusters, according to new plans published by the Higher Education Authority.
The HEA has written to the presidents of the colleges giving them six months in which to submit plans for major reform.
The agency, which published three documents today, said a proportion of future funding will be tied to implementation of such strategies.
It said this marks the beginning of an intense period of planning which will result, within the year, in a blueprint for the higher education system for the years ahead.
The documents include the criteria for the establishment of new so-called 'technological' universities.
These will be formed through the amalgamation of existing Institutes of Technology or universities.
They also outline in detail a range of reforms that the HEA now wants implemented.
They include the absorption of smaller colleges, such as the colleges of education, into larger existing institutions; and an end to what the HEA calls the unnecessary duplication of courses, such as nursing, at centres throughout the country.
The HEA said recent third level policy has resulted in a crowded and unstructured landscape.
Speaking on RTE's Morning Ireland, HEA Chief Executive Tom Boland said that "at present we invest something in the order of €1.2bn in the higher education system."
"It is not the best use of resources to spread that, or to spread a significant part of it, across a significant number of smaller institutions," he added.
The HEA has told colleges to narrow their focus and develop core areas of strength.
The agency has also told the colleges that they must form regional clusters, with the potential to share facilities, administration systems and even staff.
