Home Secretary Theresa May said the principle of free movement within the EU has allowed jobless citizens to move countries in search of work and benefits, putting pressure on public services and infrastructure.
She added that the events of this summer, which has seen hundreds of thousands of migrants and refugees risking their lives to reach Europe, should act as a "wake-up call" to EU leaders.
Earlier this week official data showed net migration in to Britain had reached a record high, hitting 330,000 in the year to March. May said the figure was "far too high" and "simply unsustainable".
"When it was first enshrined, free movement meant the freedom to move to a job, not the freedom to cross borders to look for work or claim benefits. Yet last year, four out of 10 EU migrants, 63,000 people, came here with no definite job whatsoever," she said.
Earlier this month, May visited Calais in France to inspect new security measures preventing migrants from reaching England via the Channel Tunnel.
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