S&P has cut Ukraine to CCC from CCC+ and kept the country's outlook at negative, saying that it is likely that the government will default.
S&P's move has come after a week of violent anti-government protests has left almost 80 people dead and prompted the EU to impose sanctions.
The deteriorating political situation "puts the government's capability to meet debt service at increasing risk," S&P says.
The EU has been trying to broker a settlement that could involve early elections and constitutional changes, while President Viktor Yanukovych is under increasing pressure to quit.
Ukraine, which is a key energy route between east and west, has become the center of a battle for influence between the EU and Russia.
The protests originally started late last year after Ukraine withdrew from a partnership deal with the EU and took a financial bailout from Moscow instead.