This raises borrowing costs for the already financially strapped country, making it harder to raise funds.
The downgrade also means certain investors, such as pension funds and insurance companies, will no longer buy Greek debt at such a risky rating.
Portugal's debt was also downgraded on Tuesday, leading to fears the crisis could spread beyond the two countries and further undermine the euro currency.
Greece has requested $52bn from eurozone governments and the IMF to shore up its finances but the reluctance of Germany, the largest country using the euro, to move quickly in providing assistance has sent shudders through markets.
Al Jazeera's Barnaby Phillips reports on continued industrial action in Greece
Investors fear the money may not reach Greece to enable it to avoid default by May 19, when $12bn in bond payments becomes due.
Herman Van Rompuy, the EU president, has now announced that eurozone heads of state will meet to discuss the crisis in Brussels around May 10.
He also said on Wednesday that "there is no question about restructuring" Greece's debt, with aid negotiations "well on track".
"On the basis of a report to be finalised in the coming days, heads of state and governments will decide to activate the financing of the joint programme under negotiation now between the European Commission, the ECB [European Central Bank] and the IMF [International Monetary Fund] and of course the Greek government," he said.
"The negotiations are going on. They are well on track and there is no question about restructuring of the debt."
The German government, which is the largest single contributor to the bail-out package with an $11.2bn loan, is reluctant to vote on the deal until after May 9 elections in the country's most populous state - North Rhine-Westphalia.
As a result, the meeting in Brussels is likely to take place the day after the election.
The rating downgrade left Asian markets broadly lower on Wednesday, with Japan's benchmark Nikkei share average down around 2.5 per cent in afternoon trade while Hong Kong's Hang Seng and South Korea's Kospi were both lower by more than one per cent.
On Wall Street, the Dow Jones industrial average fell 213 points, or 1.9 per cent, to 10,991.99 on Tuesday, its biggest drop since it fell 268.37 points on February 4, also amid concerns about European debt problems.
The FTSE 100 index of leading British shares closed down 2.6 per cent on Tuesday, while Germany's DAX slid 2.7 per cent and the French CAC-40 ended 3.8 per cent lower.
Greek and Portuguese shares were worst hit, down 6.7 per cent and 5.4 per cent respectively.
Both governments have imposed budget cutbacks against political resistance from unions at home. But markets have been sceptical that they can push through the measures given the widespread opposition.
The ratings downgrades also sent the US dollar up more than 1.1 per cent against the euro, hitting its highest level in about a year.
At the same time, gold and treasury prices also rose as investors sought safer investments.
Barnaby Phillips, Al Jazeera's correspondent in Athens, said: "The government is running out of options and it is increasingly difficult if not impossible for them to borrow on the open market.
|Share prices in Greece plunged
6.7 per cent on Tuesday [EPA]
"It is just too expensive. So they are courting help from the IMF and EU."
Charles Jenkins, Western Europe editor for the Economist Intelligence Unit, told Al Jazeera: "I'm surprised by this junk status because ratings agencies are supposed to follow the market, not guide it. And there has been nothing that has happened in Greece."
Jenkins said that other countries in the eurozone were not in as bad a situation as Greece but would probably need to take measures to reassure markets in advance of any problems.
"Spain has already done so but Portugal may need to take more measures and Italy may need to do so," he said.
Brian Peardon, a wealth adviser at Harrison Financial Group, said the markets' response was "a knee-jerk reaction". The small size of Greece's and Portugal's economies means their debt struggles are not yet a major problem, he said.
But if they were to default on their debt, other countries that hold their bonds would also suffer, and debt-strapped countries would also likely find it harder to spend more to stimulate their economies and help feed the global economic recovery.
Speaking to the Associated Press news agency following the downgrade, Giorgos Petalotis, a Greek government spokesman, said: "This shows that the problem is broader, and concerns all the other countries and not just Greece.
"As a country, we are doing everything necessary to overcome this difficult situation, we are taking the measures and decisions that have been asked of us for sometime now."
Portugal's finance minister said the downgrade would only make things worse, and urged oppositon parties to his government to help to quciky enact his debt-reduction plan.
"This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Fernando Teixeira dos Santos said in a statement.