European Council President Herman Van Rompuy said Friday that the agreement had been reached after two days of negotiations.
A senior EU official said the final number for the seven-year budget was €960 billion - much less than the €1.03 trillion that the EU's executive arm, the EU Commission, originally proposed.
The two-day fight over what the EU pledged to spend on everything from infrastructure to development aid laid bare divisions over what the role of the union should be.
"It's done!" a spokesman for German Chancellor Angela Merkel tweeted. "The 27 EU members have agreed on a budgetary framework for 2014-2020. Europe has shown itself to be capable of acting."
The EU Parliament must still approve the deal - and they have suggested that such drastic cuts are unacceptable.