Publishers of London's free afternoon newspapers face a distribution ban if they fail to pay for a dedicated recycling service.
The council wants the papers to pay £500,000
Westminster City Council said the companies had "a week or so" to come up with extra funds to deal with the cost of disposing of discarded copies.
London Lite and thelondonpaper have already pledged money for recycling but the council says it is not enough.
Both papers said they were in talks with the council over the issue.
Westminster Council says it collects an extra 1,000 tonnes of paper a year since the introduction of the two free papers last summer.
Every day one million copies are handed out on the streets, with 20 tonnes of paper going into landfill sites or incinerators each week.
The council wants £500,000 to set up a dedicated recycling service but says the publishers have only offered half that amount.
Councillor Alan Bradley said: "If we don't get a satisfactory offer in the next week or so I am proposing to summon them to a meeting at which I will make clear that the sum they have offered is not satisfactory."
London Lite said: "We will be responding by 20 April with a proposal.
"We firmly believe London Lite has led the way during these recycling discussions and we remain committed to finding a satisfactory solution."
Thelondonpaper said: "We have already pledged financial support for new recycling bins and facilities.
"We take environmental issues very seriously. We are due to meet the council soon."