The original deadline, which expired Wednesday, had been set in late September when firefighters put our 13 rubbish fires in and around Naples, Italy's ANSA news agency reported.
"They gave Naples a two-month extension," Italian Environment Minister Corrado Clini said. "The time we have to convincingly intervene is very tight. Otherwise, there will be a colossal fine that we will all have to pay."
The European Court of Justice condemned Italy last year over its failure to take steps to deal effectively with the trash problem in the southern region of Campania, of which Naples is the capital.
If the court condemns the country over trash a second time, Italy would have to pay penalties for both present and past violations at a "very high cost," said Joe Hennon, a spokesman for Janez Potocnik, European commissioner for the environment.
ANSA said thousands of tons of trash covered the streets of Naples and surrounding provinces in the summer, resulting in citizens setting fires to burn waste and register their dissatisfaction with the situation.
The news agency said trash woes have continued, in part, because of technical failures at incinerators and a lack of investment in landfill sites.