The sources, who asked not be identified, said research over several years showed a difference between emission levels recorded in the laboratory and those found in real driving conditions.
"The lessons we took from that very quickly is that we needed to commence new, more reliable road driving emissions testing, which should also prevent any kind of a defeat device being installed," the source said.
VW sparked global outrage after the iconic company admitted that 11 million of its diesel cars were equipped with so-called defeat devices that covertly turn off pollution controls when the car is being driven and turn them back on when tests are being conducted.
The scandal broke in the United States, where VW faces possible fines of more than $18 billion (16.1 billion euros), but diesel cars account for only a small part of the market there.
In Europe, they are mainstream and have been marketed as more fuel-efficient and environmentally friendly than traditional petrol-engined cars.
Asked if the Commission knew that defeat devices existed, one of the EU sources said: "Yes, we banned them. Did we know defeat devices were being used in the EU? No."
Another source added: "Future legislation (will be) more efficient to prevent their use."
The European Union since the 1990s has progressively adopted tighter auto emission standards for carbon dioxide and the harmful nitrogen oxides vehicles produce but it is up to the 28 member states to enforce them.
It banned defeat devices in 2014 under what is known as the Euro 6 regulations which require automakers to meet lower emission targets.
The European Commission, the EU's executive arm, said Friday that "currently emissions are measured on a laboratory test cycle (NEDC) which does not reflect the emissions of vehicles in normal driving conditions."
"To address this shortcoming, the Commission has been working to develop Real Driving Emission (RDE) test procedures," it said.
"RDE testing will reduce the currently observed differences between emissions measured in the laboratory and those measured on the road under real-world conditions, and to a great extent limit the risk of cheating with a defeat device."
The new testing procedure will come into force in January, the Commission added.