The number of people arriving for more than 12 months minus those leaving in the year to December 2011 was 216,000, some 36,000 lower than the previous year but not a statistically significant difference, the Office for National Statistics (ONS) said.
Prime Minister David Cameron and Home Secretary Theresa May want to reduce the number to under 100,000 by the end of the Parliament in 2015.
Long-term immigration fell slightly to 566,000 from 591,000, similar to the level it has been at since 2004, while emigration rose slightly from 339,000 to 350,000.
Study was the most common reason for those coming to Britain, with figures showing 232,000 came last year, similar to the 238,000 in the year to December 2010.
But the number of visas issued for the purpose of study, including student visitors, were down a fifth in the 12 months to June, the ONS figures showed.
There were 282,833 visas issued for study, a fall of 21% compared with the previous 12 months.
The number of National Insurance numbers (Ninos) issued to newly-arrived foreign workers also fell 15% in the year to March, the ONS figures showed.
Immigration Minister Damian Green said: "We are now starting to see the real difference our tough policies are making, with an overall fall in net migration and the number of visas issued at its lowest since 2005.
"At the same time, there are encouraging signs that we continue to attract the brightest and best and to support tourism in the UK.
"We will continue to work hard to ensure that net migration is reduced from the hundreds of thousands to the tens of thousands by the end of this Parliament.
"We are doing this by improving the selectivity of our immigration system and increasing enforcement activity to prevent people coming into the UK illegally and removing those with no right to be here."
But left-of-centre think-tank the Institute for Public Policy Research (IPPR) said the figures showed "the folly of the Government's target to reduce net migration to less than 100,000 a year".
Associate director Sarah Mulley said: "The combination of recession and immigration policy changes may be starting to have an impact but more than a third of the fall is due to a rise in emigration.
"The statistics show that the Government remains a long way from its goal."
While the more up-to-date visa data suggested further falls were on the way, "even reductions on this scale seem unlikely to be enough to get net migration under 100,000, not least because student migration is mostly short term", she warned.
Ms Mulley added: "If the target is missed, public confidence in the immigration system will be further undermined, making the politics of migration in the UK even more ugly than it is already.
"The more immediate problem though, is that the Government is making progress towards its target only at significant economic cost: reducing the numbers of skilled migrants who come to the UK to work hard, pay taxes, help businesses grow, and staff our public services, as well as fee-paying students who support our colleges and universities and provide jobs for thousands."
The number of National Insurance numbers (Ninos) issued to newly-arrived foreign workers also fell 15% in the year to March, the ONS figures showed.
Immigration Minister Damian Green said: "We are now starting to see the real difference our tough policies are making, with an overall fall in net migration and the number of visas issued at its lowest since 2005.
"At the same time, there are encouraging signs that we continue to attract the brightest and best and to support tourism in the UK.
"We will continue to work hard to ensure that net migration is reduced from the hundreds of thousands to the tens of thousands by the end of this Parliament.
"We are doing this by improving the selectivity of our immigration system and increasing enforcement activity to prevent people coming into the UK illegally and removing those with no right to be here."
But left-of-centre think-tank the Institute for Public Policy Research (IPPR) said the figures showed "the folly of the Government's target to reduce net migration to less than 100,000 a year".
Associate director Sarah Mulley said: "The combination of recession and immigration policy changes may be starting to have an impact but more than a third of the fall is due to a rise in emigration.
"The statistics show that the Government remains a long way from its goal."
While the more up-to-date visa data suggested further falls were on the way, "even reductions on this scale seem unlikely to be enough to get net migration under 100,000, not least because student migration is mostly short term", she warned.
Ms Mulley added: "If the target is missed, public confidence in the immigration system will be further undermined, making the politics of migration in the UK even more ugly than it is already.
"The more immediate problem though, is that the Government is making progress towards its target only at significant economic cost: reducing the numbers of skilled migrants who come to the UK to work hard, pay taxes, help businesses grow, and staff our public services, as well as fee-paying students who support our colleges and universities and provide jobs for thousands."
Michael Cornes, operations director at international education provider Study Group, said the figures were "concerning for the higher education sector and education industry as a whole" and should act as a wake-up call for the Government.
"A fall of 21% in the number of student visas issued up to June 2012 does not show that the Government's migration tactics are working, just that it is driving the 'brightest and the best' to our main competitors in the international education market," he said.
"Sadly this does not surprise us - constant negative immigration rhetoric, combined with unreasonable entry requirements from the UKBA, is putting students off studying in the UK.
"A drop in international students will damage our universities, which rely on the economic contribution these students make, and deny domestic students the opportunity to mix with multinational academic peers.
"This is a wake-up call for the Government and it needs to act quickly to ensure that future gifted international students see the UK for what it is: a fantastic academic destination that welcomes education tourists to study in its world renowned universities."
Sir Andrew Green, chairman of campaign group Migration Watch UK, said the figures were disappointing and net migration remains "far too high".
"Today's numbers underline the huge difficulty of getting immigration back under control after 13 years of chaos," he said.
"The Government is on the right track and numbers will come down in future years.
"Meanwhile, the Government must ensure that they pursue the national interest ahead of vested interests.
"They now need a blitz on bogus students and much tougher action on enforcement and removal. For too many years we have had only a token effort at tackling illegal immigration."
Dr Martin Ruhs, director of the Migration Observatory at the University of Oxford, said the estimated figures were based on the International Passenger Survey (IPS) and margins of error meant they could be 35,000 higher or lower than stated.
So while net migration was put at 216,000 for last year, this was the central estimate for the figure which could range from 181,000 to 251,000, meaning that the apparent drop is not statistically significant.
"There is a constant desire among policy makers in all parties, the press and other interest groups in having 'hard' facts and specific numbers about migration, but the reality is that sometimes these are simply not available," Dr Ruhs said.
"The uncertainty around the official migration estimates means that the figures need to be used and interpreted with great care."
He added: "The uncertainty in the UK's migration estimates also means that it is very difficult to assess how well the Government is progressing toward its target of reducing net migration to the 'tens of thousands', or to evaluate the effects of specific policy changes.
"In simple terms, the Government could miss the 'tens of thousands' target by many tens of thousands and still appear to have hit it - conversely the Government could hit, or even exceed, its target and still appear to have missed it."
Frank Field and Nicholas Soames, co-chairmen of the cross party group on balanced migration, said: "It is clearly proving very difficult to get immigration down to a sensible level but it is vital that the Government redouble their efforts to do so."
PA
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