Shares of PacBio fell about 7.5% in after-hours trading.
The agency said in a statement that it filed the antitrust complaint because of concern that Illumina wanted the deal in order to prevent PacBio from developing into a competitor in the market for next-generation DNA sequencing.
The deal was valued at $1.2 billion when it was announced in November 2018.
Illumina said in a statement that it would push for the transaction to close. "We strongly disagree with the FTC's decision and will continue to work through the regulatory approval process as we consider next steps," the company said in a statement.
The FTC said it also authorized the filing of federal court actions to request a temporary restraining order and a preliminary injunction if needed to prevent the companies from closing the deal.
Gene sequencing is a method to analyze the genome, and among other uses, can help identify inherited disorders and markers of disease progression.
The commission, which is comprised of three Republicans and two Democrats, voted 5-0 to file a complaint with an FTC administrative law judge to argue that Illumina's purchase of PacBio, an up-and-coming rival, is an effort to unlawfully maintain its DNA sequencing systems monopoly.
"When a monopolist buys a potential rival, it can harm competition," said Gail Levine, deputy director of the FTC Bureau of Competition. "These deals help monopolists maintain power. That's why were challenging this acquisition."
The FTC said PacBio had made advances in recent years that made its analyzes more accurate and less expensive.
"Customers have already switched some sequencing volume from Illumina to PacBio for certain use cases and applications, and PacBio is poised to take increasing sequencing volume from Illumina in the future," the FTC said in a statement.