THE country's top two universities are in danger of being left behind as other countries plough big money into third-level education.
A top 100 listing in the prestigious UK-based list grabs unrivalled attention from investors deciding where to pump money into research and job creation.
TCD is Ireland's top-ranked university at 110th place, up from 117 last year, but down from its 76th placing in the same table two years ago.
But although UCD notched up a higher score in the table this year, it plummeted from 159th to 187th place as other countries spent more.
Our disappointing performance is blamed on economic cutbacks, which have worsened staff-student ratios.
The situation is compounded by increased investment in higher education in other economies.
UCD's slip in the face of an improved score shows how easy it is to be leap-frogged in the race for a world-class rating by ambitious countries putting more money into higher education.
A growing feature of the Times Higher Education rankings is the emergence of universities from Asia-Pacific, such as China, Singapore, Taiwan and Korea, even at the expense of elite colleges in the US and UK.
While the US still dominates with seven institutions in the top 10 and 76 in the top 200, 51 US colleges have fallen down the table.
Most UK institutions, including household names, have lost ground.
The Times Higher Education rankings are the most comprehensive and most widely-used in the world, including by international students deciding where to study.
The rankings use 13 separate performance indicators to examine a university's strengths in teaching, research, knowledge transfer and international outlook.
Rankings editor Phil Baty paid tribute to Trinity's "fantastic" achievement in creeping up the table.
But he said the overwhelming message was that world-class universities cost a lot of money, which was rewarded in terms of higher skills among the population and economic growth.
He said there was no question that the balance of power in global higher education was shifting with strong support for world-class universities in the East.
He added that clear national commitments to drive the knowledge economy through investment in research and innovation were starting to pay off.
Mr Baty said Ireland, with its international prominence and history of excellence in higher education, should have one, or two, placings in the top 100.
The challenge was whether to "put the resources into one or two universities and fund them to be world-class so Ireland can continue to attract the most exciting and lucrative research partnerships and get the top research talent into the country".
UCD president Dr Hugh Brady expressed disappointment.
He said: "Economic factors here were part of the reason, but we must also recognise that investment by universities in other countries is raising the level of competition internationally."
TCD Provost Dr Patrick Prendergast said Ireland deserved universities in the top 100 worldwide.
"We owe it to our country's future students that they will have access to high-calibre education provided by a leading international university," he said.
"A world-class university, however, requires resourcing at internationally competitive levels and for Trinity to sustain its position and increase further worldwide requires adequate investment in the university sector."
NUI Galway is the second Irish university to jump in the rankings, up 31 places to join University College Cork in the 301-350 band. NUI Maynooth remains in the 351-400 band.