The EU lists Turkish problems, from torture to women's' rights
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The European Commission has given Turkey until mid-December to open its ports to Cypriot ships, or face unspecified consequences.
The warning is set out in a report criticising the pace of Turkish reforms in the year since EU entry talks began.
The Commission says it will make "relevant recommendations" to EU leaders if Turkey does not meet its obligations towards Cyprus.
Correspondents say the leaders may opt to freeze Turkey's membership talks.
The decision would be made at a summit in Brussels on 14 and 15 December.
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READ THE FINDINGS
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Turkey agreed last year to extend its customs union with the EU to Cyprus, which joined the bloc in 2004, but has not done so, with the result that Turkish ports and airports remain closed to Cypriot traffic.
"Failure to implement its obligations in full will affect the overall progress in the negotiations," the report says.
"The Commission will make relevant recommendations ahead of the December European Council if Turkey has not fulfilled its obligations."
Turks tiring
Finland, the current holder of the EU's rotating presidency, is trying to persuade Turkey to open its ports to Cypriot shipping, by linking it to attempts to start direct trade between the Turkish Cypriot community and EU states.
Cyprus, an EU member since 2004, has so far blocked all proposals for direct trade.
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TURKISH MARATHON
1959 - Turkey applies for associate membership of EEC
1963 - Association agreement with EEC is signed
1987 - Application for full EEC membership
1995 - Final agreement on EU-Turkey customs union
1999 - Turkey officially becomes EU candidate
2005 - Formal opening of accession negotiations
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"We decided to give a chance for the diplomatic efforts to find a solution," said the President of the European Commission, Jose Manuel Barroso.
The Commission's report on Turkey raises serious concerns about allegations of torture, freedom of religion, women's and trade union rights, civilian control over the military, and the rights and freedoms of the Kurdish population.
It also says Ankara must ensure freedom of expression "without delay" by repealing or amending article 301 of the penal code, which has led to the prosecution of numerous writers for "insulting Turkishness".
Correspondents say Turks are tiring of the constant pressure from Brussels and are increasingly convinced that the EU does not see the country as a future member.
Some polls show support for EU membership plummeting as low as 30%.
Nevertheless, Turkish Foreign Minister Abdullah Gul said his country was committed to EU membership and remained "determined to meet all criteria set by the EU".
He said all sides must "take a step forward" to resolve the dispute over Cyprus.
Further expansion
Another European Commission report summing up the state of play with the EU's enlargement policy, says the 2004 expansion of the EU, which took membership from 15 to 25 states, has been a "considerable success" increasing prosperity across the bloc.
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It is necessary to ensure freedom of expression without delay by... bringing the legislation into line with European standards
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But it says there will not be another "big bang" expansion, in which several countries join at once, and that scrutiny of candidate countries' political reforms will be stepped up in future.
Bulgaria and Romania are due to join in January 2007, but the Commission says "a new institutional settlement" streamlining the way the EU operates should have been reached before any further members can join.
Officials emphasise that reaching an institutional settlement does not necessarily mean passing the constitution, which was rejected by voters in French and Dutch referendums last year.
They also insist that Croatia could still join the EU by the end of the decade.
Another Commission report issued on Wednesday, on the EU's capacity to absorb new members, avoids setting geographical limits to the EU.
Correspondents say it gives some hope to would-be members such as Ukraine or Moldova - but stresses that keeping its promises to existing candidates in the Balkans and Turkey is a higher priority.