The French government on Thursday said the French firm Spanghero knowingly sold around 750 tonnes of horsemeat as beef and that it was suspending the licence that allowed it to handle meat.
Consumer Affairs Minister Benoit Hamon said the "fraud" had gone on for months and that 550 tonnes of the falsely labelled meat were sent to French firm Comigel, which makes frozen food at its Tavola factory in Luxembourg.
Hamon said Spanghero would be prosecuted.
He told reporters that Comigel, which supplied millions of ready-to-eat meals to supermarkets across Europe which have now removed them from their shelves, had been deceived by Spanghero.
But the minister, who was briefing the press on a French government inquiry into the horsemeat scandal engulfing Europe, said that Comigel had failed to carry out tests that would have alerted it to the scam.
Agriculture Minister Stephane Le Foll said Spanghero's licence was being suspended while experts carried out tests on products at its plant in the southwestern town of Castelnaudary.
Le Foll said veterinarians would from Friday inspect Spanghero's premises and that the government would decide on whether or not to definitively withdraw the licence once the results of those inspections came in next week.
Spanghero on Thursday again denied any wrongdoing, saying in a statement that it had never ordered, received or resold any meat that it did not believe to be beef.
The firm noted that it had already announced that it was taking a lawsuit against persons unknown for fraud over the horsemeat scandal.
Le Foll also said that authorities had located and would destroy three horse carcasses that tested positive for an equine drug that is potentially harmful to humans and which arived in France from Britian.
He said that the carcasses were "another affair" that had nothing to do with the wider horsemeat scandal.
British Agriculture Minister David Heath said earlier Tuesday that horse carcasses that tested positive for phenylbutazone, which can cause a serious blood disorder in humans in rare cases, had been sent from Britain to France and may have entered the food chain there.