Aid and development charities say that funding is targeted at areas of conflict such as Iraq, rather than where the need is.
Last October, DfID said that one-quarter of British overseas direct aid to 'middle income' countries would be diverted to help the post-war reconstruction of Iraq, a move opposed by many charities.
The findings come from joint research by Charities Aid Foundation and umbrella body Bond, to be launched at Bond's NGO Futures seminar today attended by more than 100 NGO directors.
According to the research, 44 per cent of UK NGOs rely on DfID for funding, and because of this dependency they are very vulnerable to funding policy changes.
There was also felt to be a growing trend for funds to offer block contracts, such as DfID's agreements with larger NGOs. Smaller charities are finding it more difficult to secure funding.
CAF's director of research Cathy Pharoah, said: "There has been a burgeoning of international NGOs, around half of which are estimated to have been set up during the 1990s alone. But the funding picture is changing so fast that many of these organisations are already beginning to question whether they have a role to play in the future."
Separate research on NGOs from Oxford Brookes University backs up CAF's findings.
According to co-researcher Tina Wallace, programme partnership agreements "are becoming increasingly prescriptive about what DfID money can be used for".
She said that many staff have left NGOs because they feel their values have been eroded by NGO co-option into government agendas.
A spokesman for DfID said: "We are amazed by the extraordinarily negative tone of the research considering that DfID funding for UK NGOs has been increased by 32 per cent since 1996 to £223m."