The European Commission did not name any country or company as a target but Brussels has previously sought to restrict Chinese suppliers in the sensitive field.
The step builds on actions taken in 2023 when the EU executive urged states to exclude Huawei and ZTE from their mobile networks due to security risks.
The EU has taken an increasingly tough line on trade issues with China, but there are also security concerns -- often raised by Washington.
The EU will evaluate which states or suppliers to ban and, once identified, telecoms providers will have three years to phase them out from their networks.
Brussels has taken the step after the 2023 voluntary measures failed to yield enough change across the 27-country bloc.
Current rules give national authorities powers to issue restrictions, but less than half of EU states have used them to restrict or exclude high-risk vendors.
The states "haven't implemented it, and that's why we are now proposing that it's becoming mandatory", EU tech chief Henna Virkkunen told reporters.
The United States has long banned Huawei and sought to convince allies to follow suit over fears its products could be used to monitor communications.
- Huawei criticism -
The EU did not name Huawei but the company criticised the plans.
"A legislative proposal to limit or exclude non-EU suppliers based on country of origin, rather than factual evidence and technical standards, violates the EU's basic legal principles of fairness, non-discrimination, and proportionality," the company said in a statement.
"We will closely monitor the subsequent development of the legislative process and reserve all rights to safeguard our legitimate interests," it added.
Brussels unveiled the proposal as part of plans to revise its cybersecurity rules in a bid to bolster Europe's defences against a surge in cyber attacks.
The commission said it would work with EU states to identify and consider what steps to take to tackle risks to 18 critical sectors, such as energy and health.
- Revamping telecoms -
The commission will also unveil its proposal on Wednesday for a Digital Networks Act to overhaul Europe's telecoms networks.
The EU wants to bolster its competitiveness and boost investment. But critics say that is difficult when key sectors including telecoms and defence are fragmented with different national rules which make it difficult to scale up.
The bigger question is where the money will come from, as Brussels says Europe needs 200 billion euros ($235 billion) to modernise the telecoms network.
In a win for tech giants, a draft document seen by AFP made no mention of "fair share" payments from the world's biggest web companies for the large amounts of bandwidth they use.
Despite being a fervent wish of telecoms firms, the idea was deeply unpopular.
It became even more unlikely after the EU-US tariff deal last year, which the White House said included an EU promise not to adopt fees.
The EU executive will also give member states until 2035 to move off copper telecommunications networks, according to the draft document.
This would mean the industry has more time to switch to faster fibre networks.
Both texts will need to be approved by member states and the EU parliament.
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