The suspension, which is likely to be only temporary, comes at an awkward time for the Polish government, which is already dealing with a sharp economic slowdown and thousands of lay-offs in the construction industry.
Poland's Deputy Minister for Regional Development, Adam Zdzieblo, said the decision was "completely incomprehensible" and based on questionable assumptions.
Polish officials said they were doing everything they could to root out the suspected fraud.
The Commission said it acted after Poland launched a criminal investigation into allegations there was a price-fixing cartel involving companies bidding for road-building contracts.
Eleven people have been charged, including construction firm executives and one former director at the state road agency, GDDKiA.
Poland is the biggest recipient of European Union funds, much of it spent on improving creaking infrastructure left over from Communist rule. Poland has generally been seen in Brussels as a model for the effective use of EU development aid.
"The Commission has prudently interrupted payments until the situation is cleared and the scope of the problem is established," said Shirin Wheeler, Commission spokeswoman for regional policy.
"We would like to see the payments resumed as soon as possible and are hopeful that this will be the case," she said in a statement emailed to Reuters.
"We believe the Commission will withdraw its decision," Zdzieblo said.
In a separate case, the European Commission is investigating the way the road agency administered construction contracts that were partly paid for out of EU funds.
That investigation was launched after foreign contractors alleged that GDDKiA owed them millions of euros in unpaid fees for sections of highway they had built. The agency said it had done nothing wrong.