Tom Snow pulled funding from the university over the lack of diversity.
A single photograph has caused so much outrage that the University of Melbourne lost millions of dollars in just one day.
Last week, the university handed out its latest round of honorary doctorates and a photo of it circulated online.
But critics couldn't help but notice one glaring detail in the picture – the six recipients were all white men.
On Monday, this prompted the Snow Medical Research Foundation, which has given $24 million to Melbourne University in recent years, to immediately halt any further funding programmes.
That included suspending its Snow Fellowship programme, of which $16 million had already been pledged to the university.
"The University of Melbourne awarded their most prestigious award, their honorary doctorate, to six white men," Snow Medical said in a statement.
"Further, in the last three years, not a single honorary doctorate has been awarded to women or someone of non-white descent. This is unacceptable."
When Snow Medical challenged the university about its recent spate of awards, "the response from the University of Melbourne has been unsatisfactory," it added.
"While it appears the policies on gender equality and diversity are in place, the outcomes do not align with the University's stated goals."
The organisation's founder and chair, Tom Snow, said it was a "difficult decision" but ultimately a necessary one to suspend funding indefinitely.
"This has been a difficult decision for our family, but a decision we have made very proudly," he said online.
"Now is the time for action on gender equality and diversity."
Snow himself attended the University of Melbourne as a student in the 1990s and his foundation has given out $90 million in research funding to date, to a number of universities and various research projects.
The current $16 million in place will still be provided to researchers, the foundation clarified, in a bid to "provide long-term certainty".
Melbourne University admitted it had a lot of room for improvement but was obviously disappointed by the decision.
This has been a difficult decision for our family, but a decision we have made very proudly. NOW is the time for action on gender equality and diversity. https://t.co/KCjf7rzvV9
"The University of Melbourne is committed to strengthening a vibrant and inclusive community where diversity is recognised, valued and celebrated," it said in a statement.
"While we acknowledge the areas where we need to improve, Snow Medical has made their decision on the basis of a single honorary doctorate event.
"This event is not a true reflection of who we are as a university and the steps we are taking, and continue to take, to build a diverse university community, reflective of broader society."