The purpose of the paper is to develop approaches to evaluation of efficiency and effectiveness of R&D organizations with the aim of performance-based funding. Sources and methods. Based on comparative methods, the paper analyzes the Russian and international practice in efficiency and effectiveness evaluation of R&D organizations aimed at stimulating high quality of research and improving the general effectiveness of R&D budgeting in Russia. Results. The authors propose and provide rationale for approaches to identify top R&D organizations based on Research Excellence Index (REI). Methods of evaluation and financing based on the Index are described. Conclusion. Results of application of existing evaluation methods of R&D organizations in Russia cannot be efficiently used in budgetary planning procedures. At the same time, several countries (Great Britain, Australia, New Zealand, et.al.) have accumulated vast experience in evaluation of effectiveness of R&D organizations based on REI. Results of evaluations (combining both qualitative methods and experts' opinions) are successfully used in distribution of research grants among academic institutions. Application of REI in Russia will allow to provide additional financing to top R&D organizations without necessity to increase the general amount of the national R&D budget.