Prime Minister Dmitry Medvedev said Ukraine will be added to the embargo from January 1 next year when a landmark EU-Ukraine trade deal enters force, unless Kiev makes a deal with Moscow.
The announcement came as Russia's Communist Party announced it has submitted a bill to parliament calling for smuggled Western food to be given to the needy instead of being destroyed.
Authorities last week pulped hundreds of tonnes of cheese, vegetables and fruit as they began a campaign ordered by President Vladimir Putin to destroy food brought in despite the year-long embargo.
Iceland's foreign minister said Reykjavik was disappointed by the move that industry insiders could cost some 235 million euros (USD 261 million) and impact around 1,000 jobs.
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Scenes in Russia of imported peaches and nectarines being burnt or thrown on rubbish tips and cheese being crushed by steamrollers have angered many in a country where nearly 23 million people live below the poverty line.
The Communist bill calls for banned food that is fit for consumption to be given to people living in poverty or victims of humanitarian disasters, as well as to foreign states.
It is rare for the Communist Party to oppose a decision by Putin, but the move could offer the Kremlin an exit strategy after its policy proved unpopular with the public.
Putin's decree did not require a vote in parliament, which will return from summer recess in September.
"Russia is destroying food in front of the eyes of the world," the Communists said.
"In order to ensure the ban on imports of farm product, raw products and foods, it's enough to confiscate them."
Only food that is dangerous to eat or of low quality should be destroyed, the draft law says.
Russia slapped the ban on Western products a year ago but the authorities say that produce is being repackaged in neighbouring ex-Soviet states and smuggled in.