The new deal, which has been under negotiation for nearly two years, upgrades a previous agreement signed in 1997 that was mainly focused on liberalising trade in industrial goods.
The EU is Mexico's third biggest trade partner in goods, while Mexico is the EU's 13th biggest.
Additional details about the agreement will still need to be hashed out before it becomes official.
The wide-reaching deal will simplify the customs process and eliminate tariffs for "practically all" goods traded between EU-member nations and Mexico, according to an announcement posted Saturday by the European Commission.
The deal marks a move by Mexico to pivot away from its reliance on trade with the United States.
Tariffs on chocolate and pasta, now as much as 30% and 20% respectively, will be removed completely and trade barriers will also be lifted on cheeses such as Gorgonzola and Roquefort.
The EU-Mexico Global Agreement will make all trade in goods between the EU and Mexico duty-free, including in the agricultural sector.
A government statement says tariffs will be scrapped on Mexican orange juice, tuna, honey, agave syrup, fruits and vegetables, among others.
The deal includes a comprehensive trade and sustainable development chapter, setting the highest standards of labor, safety, environmental and consumer protection. It also incorporates commitments on tackling corruption in both the public and private sectors, and to climate change targets established under the Paris Climate Agreement. In December 2017 the European Union has also concluded a free trade agreement with Japan.
Saturday's announcement came as talks to renegotiate the North American Free Trade Agreement (NAFTA) continue and six weeks after Mexico and 10 other Pacific Rim countries formally entered into a revised Trans-Pacific Partnership trade pact.