France and Germany have decided to block Bulgaria and Romania from joining Europe's passport-free travel zone.
The French and German interior ministers said it was "premature" to let them join Schengen in March 2011.
They said Bulgaria and Romania needed to make "irreversible progress" in the fight against corruption and organised crime.
Romania condemned the decision, while Bulgaria promised to "do its utmost" to remove doubts about its membership.
French Interior Minister Brice Hortefeux and his German counterpart, Thomas de Maiziere, raised their objections in a letter to EU Home Affairs Commissioner Cecilia Malmstroem, AFP news agency reported.
Experts from EU states who visited Romania and Bulgaria are due to present a report in January that will be used by governments to make a decision on Romanian and Bulgarian membership of the zone, but it must be agreed by the Schengen members in unanimity.
A spokesman for Germany's interior ministry said there had also been a lack of progress by Romania and Bulgaria in reforming their judiciary, Associated Press news agency reported.
The spokesman said those deficits could have "grave consequences for the European Union's security" and raised concerns about an "overly swift" adhesion to the Schengen area.
Romanian President Traian Basescu said: "I believe that the Franco-German letter sent to the European Commission is an act of discrimination against Romania."
Bulgarian Foreign Ministry spokeswoman Vessela Cherneva told AFP: "We are aware that the political situation in some EU member countries is complicated. For that reason, we will do our utmost to remove any doubts, including in the areas of the judicial system and society as a whole."
The Schengen zone is made up of 25 European countries - the 27 EU members, minus the UK, the Irish Republic, Bulgaria, Romania and Cyprus; plus three non-EU nations - Norway, Iceland and Switzerland.