Reports from Brussels say the European Commission will recommend that Bulgaria and Romania be admitted to the EU in 2007 - if their reforms stay on track.
The EU still has serious concerns about Romanian democracy
A Commission paper - due out on Wednesday - also proposes a safeguard clause which could delay the two countries' entry by one year.
The delay would be enforced if economic and administrative reforms stall.
The EU has called on both countries to reform public administration and their judiciaries and root out corruption.
The BBC's Oana Lungescu in Brussels - who has seen the Commission documents - says both Bulgaria and Romania are described as having a functioning market economy.
Romania is experiencing its fifth successive year of economic growth, spurred by a recent wave of big privatisations in the energy sector.
But its democracy, however, is not functioning so well.
The Commission report says there has been a disturbing increase in serious physical attacks against investigative journalists.
It also warns that the editorial independence of media companies may be compromised by their huge debts to the state, and that elected officials are using the selective award of advertising contracts to influence coverage.
Corruption remains a serious and widespread problem, the report says. It says the number of prosecutions is low, particularly for high-level corruption, and those supposed to enforce the law are often corrupt themselves.
The European Commission also raises serious concerns about a $2.5bn contract for a new motorway, which Romania awarded to the US company Bechtel without public tender.
The incoming enlargement commissioner, Olli Rehn, said the safeguard clause "is not included in the accession treaty just for fun".
"It's a serious clause and, were Romania not able to achieve the European standards in time, then we would not hesitate to use this safeguard clause," Mr Rehn said.
It is not the sort of EU report that will help Romanian Prime Minister Adrian Nastase and his ruling Social Democratic Party in next month's elections, our correspondent says.
In a surprise development, the popular mayor of the capital Bucharest, Traian Basescu, will face Mr Nastase in the presidential race after the main candidate for the centre-right opposition withdrew in tears. He first cited health reasons, but it later emerged he may have been blackmailed with allegations of corruption.
Meanwhile Bulgaria, which has already concluded EU entry talks and is generally seen as better prepared for membership, will be told that its capacity to prosecute those who commit organised crime and corruption is seriously affected by the delays in investigating suspects before trial.