After examining action taken in April by Rome and Paris to stem a feared tide of largely Tunisian migrants, the EU's executive arm said that while neither nation had breached European regulations, both had placed "increasing strain" on the 25-nation passport-free area.
"From a formal point of view, steps taken by Italian and French authorities have been in compliance with EU law. However, I regret that the spirit of the Schengen rules has not been fully respected," said Home Affairs Commissioner Cecilia Malmstroem.
Faced with a large influx of migrants from North Africa, many desperate to get to France, Italy unilaterally issued 25,000 Tunisians with temporary residence papers enabling them to move freely within the Schengen area.
France responded by stopping trains from Italy carrying immigrants, citing risks to public order.
Malmstroem said "police checks carried out by French authorities remained within the limits compatible with the Schengen Borders Code", while Italy's decisions to issue residence permits and travel documents "have not been in breach with EU law."
But she said the spat between the two nations highlighted the need to improve the rules governing an area built on trust and confidence.
"Schengen and free movement is one of the most tangible, popular and successful achievements of the European project," she said in a statement.
"We need to ensure a coherent interpretation and a smooth implementation of the Schengen rules, in a spirit of solidarity and mutual trust."
In late June, EU nations tasked Brussels with setting down criteria under which Schengen members could resume border checks in the event of a spike in migration such as that seen in France and Italy since the Arab Spring.
The European Commission is to deliver its findings in September.
Currently, Schengen nations are up in arms over Denmark's deployment early this month of customs officers at its borders with Germany and Sweden.
The Scandinavian country argues random checks are in line with Schengen and that their aim is to combat the smuggling of illegal goods and drugs, not to control travellers.
The European Commission has warned however that Copenhagen failed to justify the move and is to deliver a verdict on whether Denmark is in breach after the summer break.