There are "grave concerns" students are being radicalised in British universities, according to a report by the All-Party Parliamentary Group on Homeland Security.
The problem should be tackled "with utmost urgency", the group says.
Universities say there is no evidence to support the claims.
The report - the group's first - also says some academics are not co-operating with the security services because they "do not want to spy on their students".
It says: "The problem of universities as places of radicalisation requires urgent and sustained attention by the new government.
"It has been an obvious and neglected problem for too long and must be tackled as a matter of utmost urgency."'Reluctance'
The report says some universities have struggled "to establish the correct balance between academic freedoms and university authorities' responsibilities as part of ensuring UK homeland security".
It adds: "It was also noted that there was a reluctance to co-operate with the police on the part of some universities that did not want to be seen to be 'spying' on their students."
Concerns about the possibility of young people being drawn in to extremist Islamic groups while at British universities have been heightened by some terrorists attacks.
Last year the Prime Minister David Cameron said Britain needed to do more to "de-radicalise" its universities.Former London student Umar Farouk Abdulmutallab is accused of attempting to blow up a plane flying to the United States
Taimour Abdulwahab al-Abdaly, who blew himself up in Sweden last December, had been a student at university in Luton.
And Umar Farouk Abdulmutallab - the alleged "underwear bomber" - is accused of attempting to blow up a plane flying to the United States on Christmas Day in 2009.
He was a former student of University College London (UCL) and closely involved with its Islamic Society.
However, an inquiry by UCL found no evidence that the Nigerian had been radicalised while at university.
Universities UK, which represents university leaders, says they take their responsibilities regarding public safety "very seriously".
Chief executive, Nicola Dandridge, said: "There is no evidence to suggest that universities are 'hotbeds of Islamic extremism'.
"The experts, including police and counter-terrorism experts, state quite firmly that there is not a major problem with radicalisation or extremism in higher education at present.
"The issue is that the people most likely to be vulnerable to radicalisation or extremism are young people, many of whom will either be students or former students. Over 40% of young people in the UK will enter higher education."
Earlier this year, Universities UK released a report saying there was good liaison with the police and security services and two thirds of universities had engaged with a government programme aimed at stopping students supporting terrorism.
The report said universities needed to "remain vigilant" to campus extremism while protecting freedom of speech and included updated guidance for universities.
The Federation of Student Islamic Societies accused sections of the media of "maligning" Muslim students.
Spokesman for the group, Qasim Rafiq, said: "Time and again Muslim students are subjected to intense scrutiny and public backlash on the back of sensationalist articles and reports, serving only to damage campus cohesion and whip up anti-Muslim sentiment.
"There is no conclusive evidence of radicalisation on campus."
He added that allegations of extremism should be "investigated maturely, responsibly and with an evidence based approach".
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