The Government faces being hauled before the European Court of Justice unless it immediately enforces a ban on turf-cutting on protected bogs.
The European Commission claims it has aerial photos suggesting raised bogs in the Midlands are still being harvested for peat despite a Government imposed ban.
Thirty-two sites in the West and Midlands were shut down last year with local landowners barred from cutting fuel and offered 1,000 euro a year for the next 15 years.
A Commission spokeswoman said: "The evidence that has come is that the cutting has been going on in the meantime. There's been no change. So they (the Government) issued the ban, but the ban is not being enforced."
The Commission sent a warning letter to the Government in January and received a response in early May which gave assurances that the ban would be enforced. But around a fortnight later Friends of the Irish Environment sent a detailed report to the Commission with photos allegedly showing large-scale machine cutting was still taking place.
The Commission will now send the Government a reasoned opinion - a final deadline notice giving Ireland one month to comply. If the issue is still not resolved Ireland will be brought before the European Court of Justice and could face multimillion euro fines.
There are more than 1,500 raised bogs in Ireland and 139 of these have been designated for nature protection.
The Friends of the Irish Environment said it has provided the Commission with two reports over the last 18 months - one allegedly showing industrial extraction from unprotected raised bogs in the Midlands and the other on continued cutting on the country's most protected bogs. A spokesman said: "The level of mechanical destruction we have recorded is savage. Even our own members were shocked at the scale of what is going on."
Jimmy Deenihan, Minister for Arts, Heritage and the Gaeltacht, insisted all sides in the disputed cutting of turf accepted it must end on protected lands.
"I have also put in place a system of monitoring to ensure that no further cutting takes place on the affected bogs," he said. "I believe we have demonstrated real progress on the ground over the past two months or so and, having acknowledged that, this issue will continue to remain a priority of this Government."