Annual net migration to UK falls first time since 2008-09
At the same time, the number of people choosing to leave the UK rose from 108,000 to 127,000.
Home Office minister Mark Harper said the latest figures showed the government was bringing immigration "back under control".
"Our tough policies are taking effect and this marks a significant step towards bringing net migration down from the hundreds of thousands to the tens of thousands by the end of this Parliament," he said.
"At the same time, we continue to attract the brightest and best: these figures show that there has been a small increase in the number of sponsored student visa applications for the university sector."
The net migration target has caused some tension within the ruling coalition, with Lib Dems and some Tories - including Mayor of London Boris Johnson - believing it risks send the wrong signals to foreign students and hampering the economic recovery.
Further, there are warnings that any fall in net migration driven by lower student numbers could come at a "significant economic cost", the report said.
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