The U.S. Justice Department said Friday it was investigating Volkswagen after the German automaker admitted it added software on its vehicles to deceive emissions tests.
"We take these allegations, and their potential implications for public health and air pollution in the United States, very seriously," the department said in a statement. "The Department of Justice is working closely with the EPA in the investigation into these allegations."
Earlier on Friday, the Environmental Protection Agency said it will be cracking down on Volkswagen following the scandal.
The EPA said it will hit the company with a range of penalties as a result of the investigation, but added that it has not issued a recall since the discovery.
"We are upping our game," Chris Grundler, head of transportation and air quality at the Environmental Protection Agency, told reporters in a teleconference.
The automaker, one of the largest car companies in the world, could face fines of $37,500 per vehicle in the U.S., the EPA said last week. With around 482,000 of its diesel vehicles sold in the U.S. since 2008, this could mean a penalty of up to $18 billion.
The agency also said it has already begun new testing of all diesel-powered vehicles, and is planning even more new tests.
The EPA said it will improve its ability to detect so-called defeat devices or software that can reduce emissions during testing. But it will not tell automakers specifically how it is improving the testing.
"They don't need to know," Grundler said.
It added that the vehicles are safe to drive. Nevertheless, it also said these events make it clear it needs to improve its oversight over automakers and that Canada's Department of the Environment would be an active partner in testing vehicles more quickly.
Volkswagen German-listed shares have fallen nearly 30 percent in the last week, according to FactSet.
—CNBC's Meghan Reeder and Reuters contributed to this report.