David Cameron has said the government would be prepared to use hundreds of millions of pounds of overseas aid cash to bail out the defence budget.
The Prime Minister said he was "very open" to the idea of pooling resources between the departments for peacekeeping and other non-combat activities.
The suggestion has alarmed charities and aid agencies. Oxfam warned that merging security and aid would mean "insane choices" had to be made between a family's safety and its education.
But it will go down well with Tory backbenchers, who are furious the overseas aid budget has been protected amid spending cuts to other departments.
The UK has been praised for honouring a commitment to spend 0.7 per cent of national income on overseas aid, and it is one of the few departments -along with the NHS and schools - protected from spending cuts.
But now some of the money could be diverted to stabilise war-torn states, and NGOs fear the target could be under threat.
Oxfam's head of policy Max Lawson said the aid budget should be spent on "hospitals and not helicopter gunships".
He told BBC Radio 4's Today programme: "The millions of people up and down the country who support the fantastic
stance the Government is taking, protecting the aid budget when every other G8 nation is not doing that - they expect this to be spent on schools and not soldiers.
"So we cannot see any penny diverted into the military."
But Tory MP Patrick Mercer, a former Army officer, said security and overseas aid were "inextricably linked".
He said: "I absolutely understand the need for overseas aid although not necessarily at this level. But I do see that so much of the aid we have attempted to spend in the past in places like Iraq and Afghanistan has not been delivered as effectively as it might because of the lack of a benign security environment.
"If that means more money has to be spent on defence in order to increase the efficacy of overseas aid spending, I'm all for it."
Cameron, speaking on the final day of his trip to India, said initiatives, which provide the basic level of security needed for development to take place, could be an "important" use of aid funds.
Asked whether he felt there was room for money in the aid budget to be spent on defence activities, Cameron said: "I think we have to demonstrate that the DfID budget is spent wisely."
He added: "DfID and the Foreign Office and the Defence Ministry work increasingly closely together.
"If you are asking me can they work even more closely together, can we make sure that the funds we have at our disposal are used to provide basic levels of stability and security in deeply broken and fragile states, then I think we should.
"That is an important part of development.
"There is the conflict pool which we already use. Can we do more; can we build on this approach? I am very open to ideas like that."