EU Agriculture Commissioner Mariann Fischer Boel said the commission would provide 90 million euros (114 million dollars) per year to finance the project, with member states pitching in on a voluntary basis.
The agreement was reached at a meeting of EU farm ministers in Brussels, with the free distribution of fruit planned to begin at the start of the 2009-2010 school year, the EU's executive arm announced.
"Giving kids good habits at an early age is crucial as they will carry these into later life," Fischer Boel said.
"Too many of our children eat far too little fruit and vegetables and often don't realise how delicious they are.
"You only have to walk down any high street in Europe to see the extent of the problems we face with overweight kids. Now we can do something about it."
The idea had its origins in a reform of the EU fruit and vegetables subsidy system last year.
Rather than destroy overproduction in order to keep prices down, the plan to provide them free to school children was born.
Some 22 million children in the European Union are overweight and five million of them classified as clinically obese, with the figure set to rise by 400,000 per year.
The member states are being ask to participate in funding the system which is similar to the existing scheme for school milk.
Member state governments will have the choice of whether to participate or not in the new scheme either on a 50-50 basis with the commission, or 75-25 for poorer nations and outlying regions.
The World Health Organisation recommends a minimum daily net intake of 400 grammes of fruit and vegetables per person.
Most Europeans fail to meet this target with the downward trend evident among the young.
National authorities will have to draw up strategies for introducing the system which is scheduled to begin in the 2009-2010 school year.
The European parliament on Tuesday called for a fruit a day to be offered.