More than half of Europe's development aid budget is going to "middle-income" countries which should not qualify, MPs have warned.
A report by a House of Commons Committee challenges the UK Government, which provided £1.23bn in aid via the EU in 2010, to demand tougher standards to ensure support goes to the neediest nations.
"British taxpayers want the aid they give to go to the places where it can make the most difference, to countries where millions of people are getting by on less than a pound a day," said Liberal Democrat MP Malcolm Bruce who chairs the International Development Committee.
The committee's report reveals that only 46% of EU aid for developing countries goes to low-income states: an "unacceptable" figure.
The rest, it says, goes to relatively better-off countries, many neighbouring the EU such as Turkey and Serbia.
"Turkey has consistently been in the top five recipients of European Commission aid (£182m in 2010) as has Serbia (£178m in 2010)" it says.
Mr Bruce warned: "Giving aid to relatively rich countries like Turkey could devalue the concept of aid."
The committee urged the UK to demand that future funding be diverted from higher middle-income countries bordering Europe to give greater help to the poorest people in the world.
That, says the report, involves challenging the definition of official development assistance (ODA), through which the relevant EU aid is spent.
Mr Bruce said: "Ministers must be bolder in challenging the definition of what qualifies as ODA. It appears to be being used as a way of fudging the figures to help other European countries meet the (internationally agreed) target for 0.7% of GDP to be given as aid."
The report says: "The DFID (Department For International Development) Minister told us that 'it would take forever and be difficult' to change the definition of ODA so as to exclude relatively wealthy countries and that a change in the definition would make it difficult for some countries to meet the 0.7% target.
"We do not accept this: the Government should be bolder and less risk averse by tackling the criteria for ODA so that more funding goes to the world's poorest people and the poorest countries, and less to the European neighbourhood. Failure to do this may undermine the UK public's support for EU institutions."
The committee praises the benefits of the EU as a conduit for development aid, saying some member states would spend less on aid were it not for the European Commission.
The EU has a presence in countries where the UK has no bilateral aid programmes, enabling London to play a part in development support for countries such as Niger and Haiti.
But the report says that, in doing the best for poor nations, the UK should "lead by example" by making progress towards achieving the 0.7% aid-giving target: "Only by meeting the target ourselves can we continue to put pressure on other EU member states to do the same, particularly Germany, France and Italy."
Oxfam welcomed pressure for re-targeting aid towards the poorest.
"We fully support MPs' call for EU aid to be targeted where it is most needed," said Oxfam policy adviser Claire Godfrey.
"If aid is not about helping the poorest then it is not worthy of the name. But reopening the definition of ODA is not necessary and could be counter-productive."
She added: "The UK Government should support an increase in EU aid, which this report shows is delivering improved results. This would make a massive difference to poor people who rely on European aid to provide schools, clean water and life saving medicines."
International Development Secretary Andrew Mitchell backed the report's call for more aid attention on poorest countries:
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"We absolutely agree with the Committee that the EU must refocus its aid on the poorest countries and cut out waste and inefficiency," he said.
"Following relentless pressure from the Coalition Government, the EU is already reforming the way it spends aid, making it more transparent, results-focused and targeted at the poorest people."
But he defended support for Turkey, insisting: "Supporting Turkish accession to the EU has been the policy of successive British governments and is firmly in the national interest."
DFID says that support for countries bidding to join the EU, such as Turkey, has counted as aid under internationally-agreed rules since 2007.
Commission financing for Turkey and Serbia through "pre-accession" accords which link funding to reforms to meet EU membership criteria is fully backed by the Government.
The Government says that, thanks to UK pressure, the EU is reviewing its approach to aid, cutting support for relatively rich countries in Latin America, and boosting "transparency, value for money and accountability".