Kyiv argues Moscow is using the pipeline as a geopolitical tool against them.
Germany's network regulator on Tuesday temporarily suspended its procedure to approve the operator of the Nord Stream 2 pipeline that will supply Russian gas to the country.
The agency said in a statement that "the certification of an operator of the Nord Stream 2 line is only possible if the operator is organised in a legal form under German law".
The operator of the pipeline is based in Zug, Switzerland, and has decided not to convert itself in a way that would fulfil the criteria, choosing instead to set up a German subsidiary that will own and operate the German section of the pipeline, it added.
"The certification process remains suspended until the transfer of the essential assets and human resources to the subsidiary has been completed," it also said.
The controversial pipeline, which began in April 2018, has been strongly criticised by the United States, Ukraine and Poland.
The two European countries argue that because the pipeline, which runs from Russia to Germany through the Baltic Sea, bypasses them, it gives Moscow another tool to pressure Kyiv.
Most of the Russian gas supplying Europe currently flows through Ukraine, which Kyiv believes gives it some security against Russian aggression.
Last month, Russian President Vladimir Putin said the country could quickly boost natural gas supplies to the European Union once German regulators allow the new pipeline to start operation. Energy prices have soared in Europe, which imports much of its natural gas from Russia.
It wasn't immediately clear to what extent the move by the German network regulator, the Bundesnetzagentur, to suspend the procedure to certify Nord Stream 2 AG as an independent transmission operator might delay those plans. This step is required before the gas can legally flow.
Washington also opposed the pipeline but struck a deal with Berlin over the summer that allowed for its completion in mid-September without the imposition of US sanctions on German entities.
The two countries stressed at the time that they were committed to countering any Russian attempt to use the pipeline as a political weapon.