"This is the wrong decision, a dangerous decision," Medvedev told a news conference at his Barvikha residence outside Moscow.
"Decisions of this kind are aimed at muscle-flexing," he said. "Such decisions are disappointing and do not facilitate the resumption of full-scale contacts between the Russian Federation and NATO."
NATO cut all formal ties with Russia as a result of Moscow's invasion of Georgia during a brief war last August, but earlier this year they agreed to resume relations.
"We will follow what happens there in the most thorough manner and make certain decisions if need be," Medvedev said of the NATO exercises.
NATO says the exercises, to be held 20 kilometers east of Tbilisi from May 6 to June 1, will be based on a fictitious United Nations-mandated, NATO-led crisis response operation and will not involve heavy weaponry. They will involve 1,300 troops from 19 countries.
Georgia's Foreign Ministry accused Russia on Friday of "yet another undisguised attempt to impose its will on the international community and to interfere in the internal affairs of the sovereign state of Georgia."
"Russia's actions clearly indicate that its aggression against Georgia has not come to a halt for one day," it said in a statement.
The leader of Georgia's separatist region of Abkhazia, Sergei Bagapsh, said the region was reinforcing its border with Georgia and confirmed earlier announced plans to host a Russian naval base and an air base, adding that the deal with Moscow would be signed "fairly soon."
"Because Western nations will now hold their exercises -- allegedly to support Georgia -- we will hold similar exercises [with Russia] in response, both in Abkhazia and South Ossetia," Bagapsh told a news conference in Moscow. "Georgia must decide for itself how it wants to exist -- at the epicenter of fighting or as a stable and peaceful state."
But NATO officials and diplomats in Brussels expressed surprise at Moscow's sharp reaction to the exercises, which were planned last year. Russia was fully informed and as a NATO partner country had been free to participate, they said.
The Pentagon said Thursday that Russian objections were nothing new and that Georgia has insisted that the exercises go ahead. NATO member Italy sought to allay Russian fears on Friday.
"There is no desire by NATO to irritate the Russian Federation," Italian Foreign Minister Franco Frattini said. "We are not interfering or intervening in any way."
One NATO diplomat said it was difficult to predict how tough a line Russia would take on the NATO exercises in Georgia, saying, ahead of this weekend's Orthodox Easter, "It could be something that will disappear with the Easter eggs."
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