This would replace a previous deal that had been in place since 2002.
It will mean that 99 per cent of products can be traded between the European Union and Mexico duty free.
Additional details about the agreement will still need to be hashed out before it becomes official. For the remaining items, customs duties will be eliminated over time or for a limited amount defined as a quota.
Since then, trade between the European Union and Mexico has risen 8% per year, resulting in a global increase of 148% in trade over the period.
In turn, Mexican exporters will benefit from the removal of tariffs on products such as orange juice, tuna, honey and agave syrup.
The agreement is also set to ensure the protection from imitation for over 300 distinctive European foods and drink products in Mexico, with so-called geographical indications, such as Comté cheese from France, Queijo São Jorge cheese from Portugal, and Szegedi szalámi from Hungary.
The EU-Mexico agreement was reached after "months of intense negotiations, said a statement co-signed by EU Trade Commissioner Cecilia Malmstrom, her agriculture counterpart Phil Hogan, and Mexico's Economy Minister Ildefonso Guajardo Villarreal".
"With the conclusion of this new agreement, Mexico and the European Union send a strong message to the world about the importance of keeping markets open, working together multilaterally to face global challenges", the Mexican government said.
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.
Conor Mulvihill, director of Dairy Industry Ireland, said the deal was a "rather unexpected development" and represents a "massive positive" for the agricultural sector in Ireland.