Disciplinary proceedings have been launched against three senior bureaucrats over fraud claims at the EU's statistics agency, Eurostat.
A team of European Commission investigators will join the fraud probe
An initial inquiry had suggested widespread and serious wrongdoing, a European Commission report to the European Parliament said.
The three people facing the disciplinary proceedings are believed to include the agency's former head, Yves Franchet.
Mr Franchet, and another senior director stepped down in May, denying any wrongdoing.
The claims against Eurostat centre on the awarding of contracts.
Investigators believe that the value of some contracts was artificially inflated, allowing extra money to syphoned off for other purposes.
The abuse of funds is believed to go back to 1989.
"The preliminary finding and indications in this report suggest that serious wrongdoing on a much more widespread scale
than previously thought may have taken place," said the commission
A 20-strong team from the commission will now join experts from the EU's anti-fraud office in probing the alleged fraud further.
The report says Eurostat's archives were "secured" on Tuesday.
Eurostat supplies information on EU facts and figures to the financial markets, journalists and others.
The case will renew concern about fraud levels at the commission. Romano Prodi took charge of the commission in 1999, vowing to introduce a zero tolerance policy against fraud.
"Today, we are taking drastic measures which will hurt, but which are indispensable," Mr Prodi was quoted as saying by Italy's Ansa news agency.
"Whatever has happened in the past will be dealt with and the functioning of Eurostat will be in line with the rules and principles this Commission intends to implement."
Prodi has pledged not to tolerate fraud
Commission Vice-President Neil Kinnock and Economics and Finance Commissioner Pedro Solbes reported the findings to parliamentary leaders at an emergency meeting.
"Unacceptable and irregular practices appeared to be
taking place," Mr Kinnock told reporters after the meeting.
He said the inquiry which would now follow would be the "most comprehensive investigation ever
undertaken by the commission".
All European Commissioners were forced to resign in 1999 amid allegations that nepotism and mismanagement were rife.
Mr Kinnock has headed efforts to "clean up" the commission's procedures.