EDINBURGH University is in talks over a rescue plan for the city's Royal Observatory, where up to 50 jobs are under threat.
The UK's Astronomy Technology Centre (ATC), which shares the observatory on Blackford Hill with the university's Institute of Astronomy, was told at the end of last year its budget will be halved over the next three years.
Now talks are under way between the university and the Science and Technology Facilities Council (STFC), which funds the ATC, about possible new arrangements to keep a viable centre in Edinburgh.
The ATC designs and builds instruments for many of the world's major telescopes and has been based in Edinburgh since 1998.
A report published yesterday by the House of Commons science and skills committee was highly critical of both the STFC and ministers over the handling of the science budget.
It said mismanagement of research funding had put some of Britain's most prestigious science facilities at risk.
Professor Ian Robson, director of the ATC, which employs around 100 people at Blackford Hill, warned last December that the workforce faced a 50 per cent cut unless the centre managed to generate extra income.
Today, Edinburgh University vice-principal Professor Steve Chapman confirmed talks had started in a bid to maintain the centre and save as many jobs as possible.
He said: "The STFC is committed to a viable Astronomy Technology Centre in Edinburgh and so is the university.
"This is a UK national facility, which is internationally respected and has an expertise and excellence we don't want to lose.
"We are looking at all the options of where we can help."
The university's Institute of Astronomy has around 40 academics and researchers based at the observatory.
Professor Chapman said the rescue plan would stop short of a university takeover of the ATC and he was confident STFC funding would continue.
Tony Bell, national secretary of the union Prospect, said: "The committee is saying the best chance of survival of the ATC is if it is transferred into university hands. Until we see the colour of their money, we don't know whether to welcome that or not."