The draft circulated by the Dutch EU presidency left blank the crucial wording on how to open entry negotiations with Ankara for leaders to fill in at their 16 -17 December summit.
It welcomed "the decisive progress made by Turkey in its far-reaching reform process" but set a strict framework for negotiations, saying membership talks could not be concluded until the bloc had agreed on its post-2014 budget.
That means the large, mostly Muslim nation of 70 million could not join the 25-nation bloc before 2015 at the earliest.
Turkish markets fell on the news. The main share index was down 2.12% to 22,800.24, compared to a loss of just over 1% before the release of the draft. The lira weakened to 1,432,000 against the dollar from 1,424,000 last Friday.
The draft, to be debated by EU ambassadors for the first time on Wednesday, anticipates that Turkey will commit itself to amend its 1963 association agreement to take account of the accession of 10 new member states last May, including Cyprus.
Turkey is a mostly Muslim nation
of 70 million people
"The European Council welcomed Turkey's [decision] to sign the protocol regarding the adaptation of the Ankara Agreement, taking account of the accession of the new Member States," it said.
An EU diplomat said this would be tantamount to de facto recognition of the Nicosia government, removing the key Greek Cypriot objection to opening entry talks with Ankara.
Cypriot President Tassos Papadopoulos said on a visit to Slovakia his country was not against the start of entry talks on "condition that Turkey conforms to all conditions and meets all obligations to the EU, as well as to Cyprus as an EU member".
Turkey's leaders have insisted they will not accept special conditions for their accession talks that have not been applied to previous candidates.
Papadopoulos (R) wants Turkey
to meet its obligations to Cyprus
They may be angered by a phrase that specifies "long transition periods may be needed and specific arrangements, in areas such as structural policies (regional aid) and agriculture, as well as permanent safeguards, notably in the area of the free movement of persons".
The Dutch draft negotiating framework went beyond the executive European Commission's recommendation issued last month, giving one-third of EU members the right to seek a suspension of talks if Ankara goes back on reforms.
The Commission has proposed that only the EU executive would have the power to propose halting the talks.