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The Home Office insisted British citizenship was a "privilege, not a right" and blamed the figures on "uncontrolled" levels of immigration under the last Labour government.
Around three quarters of the 818,000 new citizenships in the EU were granted in just six countries, according to Eurostat, the union's statistical office.
Britain topped the list with 23.7%, followed by Germany on 14%, France on 11.7%, Spain on 11.5%, Italy on 8% and Sweden on 6.1%.
Official figures have revealed that Britain granted more migrants citizenship in 2012 than any other country in the European Union.
Records released by Brussels showed that 193,900 people were granted UK passports over the year - nearly one in four of those issued across all member states.
Most of those were given to people from India, 14.6%, followed by Pakistan on 9.5%, Nigeria on 4.6% and the Philippines on 4.2%.
A Home Affairs Select Committee report on this summer's passport crisis in which holidaymakers suffered severe delays, exposed David Cameron's complacency over the situation, the shadow immigration minister has said.
"Ultimately ministers have to take responsibility and admit it was their mistakes that led to the crisis, and that their response simply wasn't good enough", Mr Hanson said.
The Passport Office is guilty of "serious management failures" after a lack of staff at the agency caused a huge backlog in applications, the chair of Hasc has said.
Keith Vaz told Good Morning Britain: "Here is an organisation that has made £124 million in surplus over two years, with a 500,000 applications backlog at the peak of the problems in the summer - with hundreds of thousands of British citizens in misery."
The Government needs "to make sure there is no repeat" of the problems at the Passport Office that plagued holidaymakers this summer, a Home Office minister has said.
Immigration and security minister James Brokenshire explained:
We need to make sure there is no repeat of the problems experienced this year.
That is why the Home Secretary commissioned two reviews of HMPO to ensure it is working as effectively as possible.
We are currently considering the findings of these reviews and will be announcing our response shortly.
Holidaymakers who suffered severe delays due to this summer's passport chaos are entitled to compensation, an influential group of MPs has said.
The Home Affairs Select Committee (Hasc) wants to see the Passport Office back under ministerial control and compensation paid to those who used the fast-track renewal service.
Her Majesty's Passport Office (HMPO) was accused of putting holidaymakers' summer plans in jeopardy as it struggled to cope with demand and a backlog of applications in progress spiralled past half a million.
The number of applications has been cut from 550,000 to 90,000, according to ministers, but it has not been enough to stop thousands of families from missing their holiday.
Compensation should be paid to fast-track applicants, who had paid an extra £30 to have their passport renewed within a week of sending off their application, Hasc said.