The University of Lincolnshire and Humberside confirmed that books by Jews and those with bibliographies mentioning Jews are banned by its affiliates in the UAE.
The British Council also admits it tolerates the censorship of Jewish works, in accordance with "local political, religious or moral publishing laws".
The statements horrified the Board of Deputies of British Jews, which accused the university of putting "profit over principles". It will seek to have the matter raised in Parliament this week.
The Quality Assurance Agency, the Government's standards watchdog, discovered the ban when it inspected Skyline College in the UAE, which teaches Lincoln and Humberside's degree courses.
The QAA has warned ULH against "excluding its students from a body of scholarship on the grounds of authors' race or creed".
A number of vice-chancellors have privately criticised some "new" universities which they suspect sacrifice quality to gain contracts. But this is the first time a university has been accused of censorship - a serious offence in academic circles.
Derek Crothall, ULH's pro vice-chancellor, first insisted it "has never allowed censorship of its degrees and courses in the UAE," but later admitted that "there is a small amount of censorship which applies to all universities in the UAE. It is highly regrettable. It is a matter of procurement."