It is one of the stormiest art world rows of recent times, pitching Rembrandt and Botticelli against Rothko and Beuys and angering art historians around the globe.

Plans to empty the Gemäldegalerie in Berlin of its Old Masters and fill it instead with 20th-century art have left cultural chiefs facing accusations of irresponsible neglect of what one critic described as the nation's family silver.

As part of a longstanding plan to re-establish Berlin as one of the world's most respected cultural centres, the Gemäldegalerie's estimated 3,000 works spanning five centuries are to be relocated to a much smaller, temporary space on Berlin's Museum Island complex to make way for a billionaire industrialist's private collection of surrealist and expressionist art, which he has donated to the nation on condition that it is put on display in its entirety.

Critics fear that the Gemäldegalerie's treasures are playing second fiddle to the 20th-century collection and will be put in storage indefinitely to be shown only in piecemeal fashion for the foreseeable future until they have their own dedicated space, which could take years.

A new building for the Old Masters' collection, which includes works by Brueghel, Vermeer, Dürer, Raphael and Caravaggio, has yet to be proposed, let alone financed and built.

Opponents accuse cultural chiefs of bowing to pressure from Heiner Pietzsch and his wife, Ulla, whose collection, valued at €150m (£120m) is described as an outstanding selection of classic modernism. It includes paintings by Mark Rothko, René Magritte, Joan Miró, Jackson Pollock, Max Ernst and Salvador Dalí. The Pietzsches say they simply want to ensure their paintings do not end up in storage.

In an open letter to Germany's culture minister, Bernd Neumann, the Association of Art Historians argued that the plans would leave the public and academics "indefinitely deprived" of some of the world's greatest artworks.

"These plans … rob one of the world's finest and, despite its wartime losses, most comprehensive collections of Old Master paintings of its unique capacity … to present more than 500 years of European painting history in encyclopaedic scope in works of the very highest quality," the letter says.

In a separate petition signed by more than 7,400 figures from the art world, Jeffrey Hamburger, professor of German art and culture at Harvard University, said the move was a tragedy that came "at the expense of one of the world's premier collections of Old Master paintings", which he said had become pawns in a chess game.

Hermann Parzinger, the president of the Prussian Cultural Heritage Foundation, accused critics of failing to appreciate the huge task of reorganising Berlin's museums after decades of war and division, which led to a large part of Berlin's art collections being broken up and dispersed.

"Historically speaking, the Gemäldegalerie works belong on Museum Island, which with its collection from antiquity to the 19th century, has the potential to rival the Louvre, and until they're back there this vision is incomplete," he told the Guardian. "But it's a process which needs to happen step by step."

He said part of the process involved creating a dedicated space for 20th-century art in the building currently now housing the Gemäldegalerie, which is conveniently located next to the Neue Nationalgalerie, Berlin's leading space dedicated to modern art.

Parzinger said: "Twentieth-century art currently has no proper space in Berlin and it's long overdue that we have something to rival Paris' Centre Pompidou, London's Tate Modern, or New York's Moma.

"The wonderful Pietzsch collection fits perfectly into this concept and will help reinstate Berlin as a superior art capital as it was before 1933 and the rise of the Nazis – who labelled much of its art degenerate – when it was itself a role model for museums like Moma.

"In short, we're rectifying the wrongs of history and re-establishing our cultural landscape, which is our calling card to the world."

Parzinger said nothing would be removed from the current gallery until he had reassurances from the government that a new museum was going ahead, adding that, even then, he would not be "locking the Old Masters in the cellar". They would be temporarily on display alongside the sculptures of the Bode Museum, "albeit more snugly displayed on the walls than we'd like under normal circumstances, but there's no need for panic – no one will come to Berlin looking for their favourite Cranach or Caravaggio and not be able to find it."

Heiner Pietzsch, who made his fortune in wholesale synthetics, told the Frankfurter Allgemeine Zeitung this week that he felt betrayed by critics and art historians, who had once eulogised the quality of his collection but were now accusing him of trying to put his works on a pedestal above the Old Masters. "For the first time I'm learning that giving doesn't necessarily bring you joy," he said.

In what was interpreted as an indirect threat to withdraw his donation, the 82-year-old said: "If the whole thing collapses, my heirs at least will be happy. They'll make a lot of money from my paintings."