The Bill, which ended its committee stage in the Commons this week, would allow grant-maintained schools to open new sixth forms without having to get Government approval.
The warning comes from the Further Education Funding Council, which claims that without a common funding and inspection regime for schools and colleges, there will be a proliferation of small, unviable school sixth forms and a fall in college recruitment. As a result, neither sector would be able to maintain the "choice and diversity" ministers expect, it says.
Sir Bob Gunn, chairman of the FEFC, has written to Education and Employment Secretary Gillian Shephard seeking protection against "a domino effect" leading to sixth forms in both the GM and local education authority sectors which cannot provide breadth.
The reforms call for "greater urgency in seeking convergence in funding levels", common quality controls and performance indicators, he said.
Ministers last year did a U-turn on a pledge to impose a common funding formula on all providers of education and training for 16 to 18-year-olds. They said their evidence showed little difference between college and sixth-form costs and that cost differences could be justified.
But this is contested by colleges which say schools have more cash to sustain otherwise unviable sixth forms. A common inspection and quality framework is being looked at longer term.
A detailed FEFC study of the impact of the Bill, sent to Mrs Shephard with Sir Bob's letter, shows a "demonstrable risk" of reduced opportunities which may "threaten the future of particular colleges."
"Of greater concern to the council is the threat to the diversity and choice of opportunity for students which will result," he said.
The limited curriculum choice would hit schools and colleges, "with the likelihood that they would no longer be able to offer the full range of A-levels in sciences and modern languages, or individual subjects such as music or further mathematics".
The FEFC estimates that some colleges will lose over half their intake. One college likely to be hardest hit is East Norfolk, on Mrs Shephard's own doorstep. It stands to lose up to 53 per cent of full-time students to four schools. All four have had proposals for new sixth-forms rejected by her.
The FEFC research and letter was sent to Mrs Shephard expressing concerns about "a domino effect" of schools rushing to open new sixth forms when the Bill was published in October.
The FEFC highlights areas where it says "choice and diversity" would be undermined by fragmenting post-16 provision. They are Berkshire, Cambridgeshire, Cheltenham, Essex, Gloucester, Hampshire, Norfolk, Rutland, Surrey, Wiltshire and Southwark.
It identified 24 grant-maintained schools in six local education authorities which have had sixth-form proposals rejected and are likely to take advantage of the changes. Many, it suggests, would not be viable as defined by the Office for Standards in Education report Effective Sixth Forms.
Pauline Latham, chairman of the GM Schools advisory Trust, told The TES most GM secondary schools would open sixth forms.