"The charge proposed by the Indian authorities is unacceptable. We totally rejuect the use of the concept of terrorism," said Italy's prime minister Enrico Letter in a tweet.
"Italy and the European Union will respond," he added.
Italy's foreign minister Emma Bonino and defence minister Mario Mauro also strongly criticised India's move to charge the Italian marines under the piracy law.
Speaking in Brussels, where Italy will assume the rotating EU presidency in the second half of the this year, Bonino described the move as "unacceptable and diproportionate". Mauro said it was "illogical", "unfounded" and "unjust".
The case was "certain" to be discussed at Monday's meeting of EU foreign ministers, she said.
The comments came after India's Supreme Court on Monday said it would held a further hearing on 18 February to decide how to proceed in the case against Massimiliano Latorre and Salvatore Girone.
Last Friday, India's home affairs ministry said National Investigation Agency should dilute the charges against Latorre and Girone from murder to violence, sparing them the possibility of being sentenced to death.
Latorre and Girone have been held in India since February 2012 when they allegedly killed two Indian fishermen off the southern state of Kerala, mistaking them for pirates. The soldiers were part of the security team of an Italian oil tanker crossing the Indian Ocean.
India claims jurisdiction in the case while Italy alleges the incident took place in international waters and the marines should be tried in their home country.