The capital institution was named 27th in the latest Times Higher Education (THE) world university rankings, down three places from last year.
In total, five Scottish universities made it into the top 200 - the University of Glasgow ranked 88, the University of St Andrews 110, the University of Dundee 180 and the University of Aberdeen 188 - but only Dundee moved up in the rankings.
Oxford was ranked number one - the first time a UK university has taken the accolade - knocking the California Institute of Technology, the five-times best, into second place.
Cambridge and Imperial College London join Oxford in the top 10 for 2016/17, named fourth and eighth respectively, vying for positions in the rankings with the likes of Stanford, Harvard and Princeton universities and Massachusetts Institute of Technology, all in the US.
THE rankings are said to examine a university’s strengths in research, knowledge transfer, international outlook and the teaching environment.
Education minister Shirley-Anne Somerville said: “I welcome these figures which underline our strength in higher education and the value with which the Scottish approach is held globally.
“Credit is due to the staff and students at all five universities for their hard work to achieve this.
“Scotland continues to punch above its weight, having more institutions per head of population in the top 200 than any other country except Luxembourg.
“This continued strong performance is against a backdrop of other European universities suffering in the rankings due to the ascent of Asian institutions.
“The Scottish Government is investing over £1 billion in our higher education institutions in 2016-17, ensuring that all of our institutions receive financial support to enable them to deliver high quality teaching, world class research and knowledge exchange and remain internationally competitive.”
The global rankings saw 91 UK universities placed in the top 980 universities, which represents 5% of the world’s higher education institutions, judged on areas such as teaching, research and industry income.
Despite this success, UK universities lagged behind on the industry income indicator, which assesses the ability to help industry with innovations, inventions and consultancy, the extent to which businesses are willing to pay for research and a university’s ability to attract funding - with the nation’s best-placed appearing at just 127 in the rankings.
The UK is the world’s second most popular destination for overseas students, according to the British Council, with 493,570 enrolled in universities in 2013/14, up around 80,000 on the 415,585 five years before.
But there were warnings that the vote to leave the European Union could pose a threat to higher education in the UK, destabilising it and hindering academics from working with colleagues on the continent.
And there are fears the looming departure from the EU could discourage overseas students from applying to British universities, with some research suggesting more than 40% are looking elsewhere.
Phil Baty, editor of the THE world university rankings, said: ‘’The UK must ensure that it limits the damage to academics, students, universities and science during its Brexit negotiations to ensure that the UK remains one of the world leaders in higher education.’’