The European parliament voted on Tuesday by a margin of 379-240 to remove controls on the sale of Israeli pharmaceuticals within the EU.
The bill, part of a wider-ranging initiative to deepen bilateral ties between the EU and Israel, has been stuck in the European Parliament for the past two years due to political objections.
The passing of the bill means that Israeli pharmaceuticals can be exported to any EU nation without delays and without requiring any additional certification.
The agreement was originally approved by the European Council in early 2010, but its implementation was delayed as a result of protests by pro-Palestinian organisations.
The decision is good news for European healthcare as well as the Israeli pharmaceutical industry. Industry estimates suggest that EU countries would save nearly 25 billion euros annually by using generic drugs such as those produced by Teva, one of the world's largest pharmaceutical companies and the largest producer of generic drugs.
David Saranga, the Israeli EU Mission's minister counsellor and head of European Parliament relations, said: "We would like to congratulate members of the European Parliament for endorsing a decision that will have wide-ranging benefits for European patients and industry alike. We are happy that this long-standing dossier has finally gained the parliament's approval after considerable delays. We look forward to working with European authorities to implement the ACAA protocol without delay."
European foreign policy chief Catherine Ashton is visiting Israel as part of a three-day tour of the Middle East. The objective of the trip, according to Ashton, is to "take co-operation forward as effectively as possible" on the political, strategic and humanitarian challenges facing the region.