Academics and students took part in a university meeting about how much to charge in tuition fees from 2012.
Pro-vice chancellor Tony Monaco said Oxford needed to charge at least £8,000 to replace cuts but students said poorer applicants would be put off.
Cambridge University’s working group on fees has already recommended charging £9,000 for all its courses.
The move raises the prospect of other leading universities setting maximum fees.
The debate held by about 100 members of Oxford University’s governing body was staged in the historic Sheldonian Theatre, with the closing speeches accompanied by shouts from protesters gathered outside the building.
Speeches from gown-wearing academics, below a ceiling painting depicting truth expelling ignorance, examined the financial, moral and social consequences of raising fees.
There were senior university figures who argued that increasing fees to the maximum £9,000 per year was an inescapable necessity when the university faced substantial budget cuts.
Professor Monaco’s presentation of the financial position suggested limited room for choices.
If there were ambitions to offer fee waivers for poorer students, raising fees to £9,000 would provide a further £14m per year for the university.
Bursar Roger Boden then suggested that even this increase would not be enough to cover the university’s funding shortfall.
Paul Madden, provost of Queen’s College, outlined how funds could be used for fee waivers. He suggested a £3,000 fee waiver for the least well-off students.
With concerns about pressures on middle-income families, Professor Madden said another approach could be to spread a lower level of support among a wider number of families.
‘Overwhelmed by debt’
But there were strong arguments from academics and students against raising fees.
Hannah Cusworth, from Brasenose College and a student union representative, told the university congregation that she was able to study at Oxford because of financial assistance.
She warned that talented young people would turn away from even considering going to university because of fears of being “overwhelmed by debt”.
David Barclay, president of the Oxford University Student Union, argued the whole debate needed to be reconsidered – and to reject the “miserly voice” which accepted the downward spiral of budget cuts and higher fees.
A series of academics also argued that there was a lack of courage within universities about defending the values of learning and pursuing knowledge.
David Norbrook, from the English faculty at Merton College, said universities should “stop apologising” for themselves.
Patrick McGuinness, from St Anne’s College, denounced the “crass and materialistic values” driving the funding cuts and challenged university leaders to reject the small-minded mentality of “tick-box English”.
Although there were few voices showing enthusiasm for raising fees, the debate outlined what will have to be considered in the final decision making process in the next few weeks.
And this will include the university’s argument that fees of at least £8,000 will be needed to break even and raising funds for fee waivers would push this figure up to the maximum.
Such arguments did not impress peaceful protesters gathered outside the congregation meeting. They called for a strike against the budget cuts and fee increase and offered flowers to academics leaving the meeting.
By Sean Coughlan
BBC News education correspondent BBC Online