BBC Monitoring, the UK service that translates and analyses global media, is in danger of becoming a "hollow shell", MPs have warned.
The government has moved responsibility for its funding to the BBC, which the Defence Committee said had "entirely predictably" led to cuts.
It added that BBC Monitoring was "vital" to diplomacy and business.
The BBC said it was "confident" the service would continue to meet the UK government's needs.
The government directly funded BBC Monitoring until 2013, when responsibility passed to the BBC under an agreement announced by Chancellor George Osborne in 2010.
The cross-party committee said this had left the service exposed, with around 100 jobs set to go unde r a re-structuring programme.
It expressed concern at plans to move Monitoring out of its current Caversham Park headquarters in Berkshire, where it operates alongside US counterpart Open Source Enterprise, because of potential disruption to information-sharing.
Currently, Monitoring covers 25% of the globe, while Open Source Enterprise covers the remaining 75%.
The committee's report said: "The government uses open-source information for indicators and warnings of areas of instability and potential threats to UK security.
"The decisions made concerning the funding and governance of BBC Monitoring over the past decade or so have been woefully short-sighted and catastrophically ill-thought-out.
"A service that has the potential to be a vital tool in opening the world to UK diplomacy and business is in grave danger of becoming a hollow shell of its former existence."
A BBC spokeswoman said: "The media landscape has changed vastly since the creation of BBC Monitoring in the 1930s and we believe our planned restructure is vital to equip us for a world in which digital skills are far more important than physical location.
"We are confident that we will continue to meet the UK government's needs for open-source monitoring and they have told us they are happy with our changes."