The European Commission is sending Ireland a final written warning for failing to make progress on ensuring drinking water supplies are kept free of E.coli bacteria, which comes from human or animal sewage.
The commission is acting on foot of a ruling from the European Court of Justice in 2002.
If the response from the Government is deemed unsatisfactory, the commission may ask the court to impose financial penalties.
The commission is sending a similar warning for failing to comply with a 2005 ruling requiring greater controls on polluting discharges to surface water by local authorities.
Environment Commissioner Stavros Dimas said: 'I am concerned that, more than four years after a court ruling, and despite substantial government investments, a significant number of local authority and private water supplies still show a presence of E.coli.
'This needs to be resolved without further delay.'
At the same time, action taken by Ireland to ban drift-netting of Atlantic wild salmon at sea has allowed a case to be closed.
The commission is also referring Ireland to the ECJ for failing to give adequate rights to citizens to legally challenge decisions in cases involving environmental impact assessments and integrated pollution prevention and control.
