Italy has been ordered by the European Union to end Naples' rubbish crisis within a month or face legal action.
The commission says residents support its stance
Thousands of tonnes of waste has piled up on the streets as refuse collections have come to a standstill.
The European Commission says the situation is "intolerable" and is giving Rome a final warning to find a short-term and a permanent solution.
Italy has set out emergency measures to tackle the problem but the Commission says they are only limited solutions.
Mounds of refuse have built up across the Campania region and residents have clashed with police, blocking roads and setting fire to the rubbish.
The Italian government has appointed former police chief Gianni De Gennaro to clear up the mess, but his proposals for new waste dumps have prompted further protests.
In a statement, Environment Commissioner Stavros Dimas said he fully understood the frustrations of residents who feared for their health.
"The Commission will continue its legal action, and if necessary use its powers to seek fines, until the situation in Campania is brought into line with the EU waste management standards that Italy and all other member states have agreed to," he said.
A first warning letter that Italy may be infringing EU waste law was sent to Rome in June 2007 after an earlier refuse crisis prompted schools to close on health grounds.
A second letter was sent in October 2007, and the Commission has now decided to issue a third and final warning described as a "reasoned opinion".
If Italy fails to comply with that, the Commission can refer the case to the European Court of Justice, which has the power to fine the government.
Commission spokeswoman Barbara Helfferich told the BBC News website that she believed the people of Naples supported the Commission's approach.
She said EU funds had been allocated for the building of an incinerator but the authorities were not moving ahead fast enough.
Ms Helfferich said there was no proper management plan for refuse disposal, tackling illegal dumping, and ensuring toxic waste was properly handled.