The Central European University (CEU) is to move most of its staff to Vienna within months in what is said to be the first forced eviction of a European university since the Stalinist terrors in the 1950s.
"This forced move is a blow to academic freedom, which is a fundamental right, and all the more troubling given that Hungary is a North Atlantic Treaty Organisation and European Union member state", Ms. Freeland said in a statement.
The US State Department issued a statement saying the US government was "disappointed" that no agreement had been concluded between Mr Orban's government and CEU, which has an enrolment of over 1,400 students from 118 countries, as well as almost 400 permanent or visiting faculty.
"We fought a battle of principle to defend academic freedom", Mr. Ignatiefff said in a phone interview from Budapest on Monday.
Chairman of the Board of Trustees, Leon Botstein, said Vienna and the Austrian federal government had welcomed CEU "with open arms" as part of their commitment to academic freedom and research.
Michael Ignatieff, rector of the Central European University gestures during a news conference in Budapest, Hungary, on December 3, 2018.More news: Ohio State adopts the Oklahoma model to replace Urban Meyer
Incoming students in CEU's masters and doctoral programs will start studying at the Vienna campus in the 2019-2020 academic year, while students already enrolled may remain in Budapest to complete their degrees.
CEU's departure was reportedly the reflection of conflict between Hungarian Prime Minister Viktor Orban and George Soros.
CEU's legal status has been in limbo for more than a year since changes to a higher education law that meant a foreign-registered university could no longer operate in Hungary unless it also provided courses in its home country. Orban accuses Soros of encouraging mass immigration into Europe, a charge the philanthropist denies.
CEU, founded in Budapest in 1991, says it has complied with all the new regulations set by Orban's government, which has refused to sign off on an already agreed document with the State of NY that would allow CEU to stay. Current students, though, can finish their studies at the Budapest campus.
Hungary's government dismissed the university's move on Monday as a "Soros-style bluff".
But he said the Orban government would not accept CEU's moves and ultimately refused to sign an agreement necessary to let it continue as a US -accredited institution in Budapest.