Russian state banks' access to capital is also likely to be restricted.
The aim is to increase the cost to Russia of its continued support for pro-Moscow rebels in eastern Ukraine.
Moscow denies charges by the EU and US that it is supplying heavy weapons to the rebels.
US Secretary of State John Kerry said Washington was also preparing further sanctions against Russia.
Details of the EU move are still coming in. The full sanctions statement is expected on Wednesday, when the EU is also set to name more Russian officials facing asset freezes and travel bans in Europe.
President Putin has urged the Russian defence sector to rely less on foreign components Calls for the EU to act have been fuelled by the downing of flight MH17 over eastern Ukraine. All 298 people on the Malaysia Airlines jet were killed, many of them Dutch citizens.
An international team has again failed to access the crash site, amid heavy fighting between government forces and rebels there.
Western governments believe the rebels shot the plane down on 17 July with a Russian missile.
Ukraine's military has been on the offensive, seeking to encircle the pro-Russian separatist rebels in Donetsk region. In the latest developments:
Several shells are said to have struck buildings in the separatist stronghold of Donetsk cityUkraine says its troops have entered the towns of Shakhtarsk and Torez in Donetsk region, and Lutuhyne in Luhansk regionTen Ukrainian soldiers and at least 22 civilians have reportedly been killed in the last 24 hoursThe dead civilians are said to include three children and five people at a home for the elderlyA group of hackers sympathetic to the rebels says it has disabled the website of the Ukrainian president.On Monday Russian President Vladimir Putin urged his country's defence industry chiefs to rely less on foreign military components and source more equipment in Russia.
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