Russian energy company Gazprom and its Austrian counterpart, OMV, signed agreements Tuesday in Vienna related to the Austrian leg of the gas pipeline.
Guenther Oettinger, energy commissioner for the European Union, said the project should be put on hold.
"South Stream project should be suspended until full compliance with EU legislation," he said Wednesday.
European leaders are wary of allowing companies that produce gas to control the corresponding transit systems.
South Stream is a Russian gas pipeline meant to avoid geopolitically sensitive territory in Ukraine. Russia meets about a quarter of Europe's gas needs, though the bulk of those supplies run through the Soviet-era transit network in Ukraine.
Gazprom this month said no gas would run to Ukraine unless it was paid in advance. Similar disputes in 2006 and 2009 resulted in gas disruptions for Europe.
Bulgaria is among the countries along South Stream's planned route expressing reservations about the project. Russian Energy Minister Alexander Novak said Tuesday the issue "is being discussed."