Alongside the ban, which includes mixtures of metallic mercury with other substances, the new rules to be introduced in March 2011 will oblige all mercury already in Europe to be "safely stored" so as not to cause a hazard.
"Mercury poses a threat to human health and the environment in the European Union and globally," said EU Environment Commissioner Stavros Dimas.
"This important piece of legislation will protect citizens by significantly reducing exposure to this highly toxic metal.
"Let us hope that other countries will follow our example," he added.
A commission spokeswoman said that the 27 EU member states would in January consider whether a ban on mercury imports is also required.
The EU ended all mercury extraction in 2001 but remains the world's biggest exporter, supplying around a quarter of global consumption of mercury.
Mercury and its compounds are highly toxic to humans and high does can be fatal.
The use of mercury is declining worldwide but it is still used in small-scale gold mining, the chlor-alkali industry and production of vinyl-chloride monomer, the basis of PVC plastic.
It has also been used in dental amalgam for fillings.