"The proposals and commitments from Mauritania do not include the immediate and unconditional release of the legitimate president, and they remain fundamentally unconstitutional and illegitimate," the EU said after talks in Paris on Monday.
"If there are no new elements within a month, the consultations will be terminated and appropriate measures will be proposed."
Mohamed Ould Maouloud, leader of the west African state's National Front for the Defence of Democracy coalition, welcomed the move.
"The junta has not managed to deceive the European Union. The EU is leaving open a last chance, but with this ultimatum we hope the junta will realise they don't have a chance. They are in an impasse."
Mauritania's presidential guard chief, Mohamed Ould Abdel Aziz, dismissed the timescale set down by the EU. Aziz led the group of generals who toppled the former president.
The new sanctions follow existing restrictions imposed by both the African Union (AU) and the US. The AU has suspended Mauritania because of the coup, although it appears that some AU members have given tacit support to the military takeover.
The US has imposed travel restrictions on some members of the military government and already frozen some of its aid to Mauritania.
Mauritania's government appear defiant in the face of international censure. Only last month the country's prime minister, Moulaye Ould Mohamed Laghdaf, said it would look to Arab nations for financial support and aid if the west cuts assistance packages.
'I'm not too happy about this isolation, even thought contacts are maintained. I would have preferred them to be better,' Laghdaf said, claiming the military government had popular support.
Laghdaf and other coup leaders allege the former president failed to tackle the security threat posed by Al-Qaeda and rising food and fuel prices.