"Jewish students need to have confidence that this is a body that represents them, and we need to be sure that the student bodies that we engage with are speaking fairly for all students," he said.
Anti-Semitic incidents
The government said it did not currently provide any funding to the NUS, and it was unclear how much funding it has provided up to now.
The move will also involve removing the NUS from all Department for Education groups - and replacing them with individual student unions or alternative bodies such as the Office for Students' student panel.
The government has said the decision will be kept under review.
A spokesperson for the NUS, which says it represents seven million students, said it was disappointed the universities minister had put the news in a press release rather than speak to it directly.
The government's decision comes as the Community Security Trust (CST), a charity that protects British Jews from anti-Semitism and related threats, reported that the number of anti-Semitic incidents on campuses had returned to pre-pandemic levels.
During this academic year, the CST said it has received reports of a total of 45 university-related anti-Semitic incidents so far, compared with 26 from the previous academic year.
There were 48 anti-Semitic campus incidents reported to the CST in the 2019-20 academic year, and 32 the previous academic year.
The charity's director of policy, Dave Rich, said the number incidents reported by Jewish students and staff "hit record levels" last year, and have continued in 2022.
'Insulting and insensitive'
Mr Rich said the NUS invited the rapper Lowkey to perform at its national conference in March 2022, days after the rapper claimed that mainstream media had "weaponised the Jewish heritage" of Ukrainian President Volodomyr Zelensky.
The Union of Jewish Students (UJS) complained and former NUS president Larissa Kennedy allegedly said Jewish students could go and sit in a safe room where they would not hear any anti-Semitism that was expressed.
"UJS understandably felt that this was an insulting and insensitive reply that didn't address the main issue," Mr Rich said.
The NUS later issued a statement saying that Lowkey had decided to pull out of the event.
At the same NUS conference, Mr Rich added that a new NUS president was elected, Shaima Dallali, who he said has a past record of "fairly extreme views".
In 2012, Dallali post a tweet that included an Arabic chant that referenced a massacre of Jews in the year AD 628, which she has since apologised for.
"It is not a coincidence that at a national level, NUS is failing to support Jewish students and its national leadership seems incapable of understanding how their own inflammatory language may be contributing to the problem," he said.
"Jewish students deserve to enjoy their university experience just as much as anybody else, and when anti-Semitism happens they have a right to expect their own institutions, and their national union, to take their side."
He said support for Jewish students from the government was welcome, but "it shouldn't have come to this".
"The NUS leadership needs to step up and address this problem, but past evidence has shown an inability to recognise and understand modern anti-Semitism, much less deal with it," Mr Rich added.
"It is vital that the inquiry announced by NUS has the full confidence of Jewish students, and that no areas of concern, including the past statements of the incoming NUS president, should be off-limits."
The NUS said: "Following a complaint about anti-Semitism we launched an independent investigation. We will be appointing a QC, in consultation with UJS, next week.
"We have sought to undertake the investigation in a serious and proper way, and are working in collaboration with UJS at every step of the way.
"Once the QC has been appointed we will be able to update on the process and timeline. We look forward to working with the government constructively on this matter."