The EU agreed on a target to cut carbon emissions by at least 55 per cent by 2030.
The agreement comes on the eve of an online climate change summit hosted by US President Joe Biden, who is expected to announce steep cuts to US emissions levels.
Britain is expected to announce a 78 per cent reduction in emissions by 2035.
The bloc’s new target comes after intense negotiations between the European Parliament, which wanted at least a 60 per cent reduction, and leaders of the member states, who agreed on 55 per cent in November.
The 2030 target was 40 per cent, but increasing evidence of climate change and a more environmentally-conscious electorate put officials under pressure to pursue a more ambitious target.
The EU's new goal will be formally incorporated into a climate law – a major step forward after months of talks that resumed early on Tuesday afternoon and continued beyond 3am.
"The European Climate Law enshrines the EU's commitment to reaching climate neutrality by 2050 and the intermediate target of reducing net greenhouse gas emissions by at least 55 per cent by 2030, compared to 1990 levels," a statement said.
European Commission President Ursula von der Leyen said the pledge would make the continent carbon neutral by 2030.
“The climate law sets the EU on a green path for a generation,” she said.
“It is our binding pledge to our children and grandchildren.”
Portuguese Environment Minister Joao Pedro Matos Fernandes – whose nation currently holds the rotating EU presidency – hailed "a strong signal to the whole world" and a goal "now set in stone".
Member of the European Parliament Pascal Canfin, who chairs the Environment, Public Health and Food Safety Committee, tweeted that the European Parliament "was ready to go for more, but it's a good compromise: #EU will do 2.5 times more until 2030 as it has done in the last 10 years".
But environmental organisations and green MEPs disagreed, with German politician Michael Bloss tweeting the legislation "does not live up to its ambition".
"This is not the #GreenDeal that we need to tackle the climate crisis and not enough for the Paris Agreement! But we will not stop fighting,” he said.
Under Mr Biden, the US returned to the 2015 Paris Climate Agreement, increasing the momentum for global action on climate change.
Countries will meet in Glasgow in Scotland for the Cop26 climate change summit in November.
UK Prime Minister Boris Johnson is pushing for attendees to commit to strong targets ahead of the gathering.