The current growth of competitive project-based funding (CPBF) as a funding instrument for academic science reveals that public funding plays a critical role in the spreading of the capitalist relations of production in academia. However, this issue has not been properly addressed in the extant literature. This paper examines CPBF in the light of the determinations of capitalist relations of production captured by the Marxist notion of ‘formal subsumption of labour under capital’. It will then show that CPBF mediates commodity-based productive relations between funding agencies and academic institutions, and that the latter are, in turn, premised on the separation of academic labour from the objective conditions of knowledge production. It will be also demonstrated how CPBF reproduces and deepens that split, leading from the partial to the complete formal subsumption of academic labour under capital. Our analysis challenges the assumption that increased public funding will put to a halt the commodification of academia and academic research.