French high school graduates are guaranteed a public university place regardless of their grades, which along with negligible tuition fees has long been held up as an egalitarian policy.
But a relentless rise in the numbers wanting to attend -- with 40,000 more this year alone -- has put a heavy strain on a system that was already suffering from chronic underfunding.
Despite a failure rate of nearly 60 percent among first-year students, previous attempts to introduce academic selection have failed under opposition from student groups.
Prime Minister Edouard Philippe said that from 2018, a controversial lottery for oversubscribed courses will be axed and universities will be allowed to give academic requirements for a course.
"I've never been afraid of the word 'selection'," Philippe said, unveiling plans that will include a new applications website and better support for failing students.
"Between heavy-handed selection and a random draw are a range of more flexible, kind and smart solutions," he added.
Unable to discriminate between students based on their grades, universities have previously been forced to allocate places on oversubscribed courses, such as psychology, randomly.
This year tens of thousands of students missed out on a chance to study their preferred subject under a system that critics say is deeply unfair to young people who have worked hard.
Every university offering a specific course -- chemistry, for example -- will have to apply the same admission standards.
But for heavily oversubscribed courses, universities will be allowed to give priority to students "whose profile, motivation and plans" are the best match, Philippe said.
France's 70-odd universities are vastly underfunded compared to its prestigious "grandes ecoles", selective higher education institutes which tend to attract the best students.
Only one French university featured in the Times Higher Education World Education Ranking 2018, and President Emmanuel Macron promised an "education revolution" when he came to power in May.
Monday's funding boost, which includes 450 million euros ($523 million) already announced, brings to nearly one billion euros the amount Macron has pledged to spend on higher education over his five-year term.
Some of the cash will be spent on creating more places for students, while the government will also build more than 60,000 new student flats.
A poll for the weekly L'Obs published Wednesday suggested that two-thirds of French people back some form of academic selection for university places.
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