The government, which on Sunday adopted its 2012 draft budget, blamed the shortfall on deepening recession.
The figures come as inspectors from the IMF, EU and European Central Bank are in Athens to decide whether Greece should get a key bail-out instalment.
Greece needs the 8bn euros (£6.9bn; $10.9bn) instalment to avoid going bankrupt next month.
Bankruptcy would put severe pressure on the eurozone, damage European bank finances and possibly have a serious knock-on effect on the world economy.
'Unanimously approved' The Greek finance ministry said on Sunday that its unpopular austerity measures would have to be adhered to even if the latest targets were to be met.
It said: "Three critical months remain to finish 2011, and the final estimate of 8.5% of GDP deficit can be achieved if the state mechanism and citizens respond accordingly."
It released figures for 2012's projected deficit, putting it at 6.8% of GDP, also short of the 6.5% target.
The figures came as the government met to approve Greece's draft budget for next year.
It blamed an economic contraction this year of 5.5% - rather than May's 3.8% estimate - for the failure to meet deficit targets.
The cabinet meeting also approved a measure to put 30,000 civil service staff on "labour reserve" by the end of the year.
This places them on partial pay with possible dismissal after a year.
"The labour reserve measure was approved unanimously," one deputy minister told Reuters.
This measure, along with other wage cuts and tax rises, have been part of a package intended to persuade the so called "troika" of the EU, IMF and ECB to continue with its bail-out.
The inspectors will report back to EU finance ministers soon but analysts believe they have little choice but to approve the latest tranche.
The Greek austerity measures are hugely unpopular at home and have led to a wave of strikes and protests.
Many Greeks believe the austerity measures are strangling any chance of growth.