Cambridge's department of land economy beat the University of Sheffield into second place, with Cardiff University third.
Data from the tables produced by the Higher Education Funding Council for England and the equivalent bodies in Northern Ireland, Scotland and Wales are used to determine which academic bodies receive grants.
Evidence from 25 submissions was assessed by a panel chaired by Cardiff's school of city and regional planning professor John Punter using a star rating system.
Cambridge professor of land economy Phil Allmendinger said: "The department is delighted. Our researchers are internationally renowned for their work on climate change, regeneration, housing, planning and environmental economics."
He said the assessments are also important because they are used by individual universities to allocate funding to departments.