The new figure, up from the previous 27% target, falls short of the 35% objective backed by the European Parliament and renewable energy trade bodies.
There remains the possibility for upward revision in 2023.
"This will allow Europe to keep its leadership role in the fight against climate change, in the clean energy transition and in meeting the goals set by the Paris Agreement," the European Commission said in a statement.
Commissioner for climate action and energy, Miguel Arias Cañete, added: "Renewables are good for Europe, and today, Europe is good at renewables.
"I am particularly pleased with the new European target of 32%. The binding nature of the target will also provide additional certainty to the investors.
"I now call on the European Parliament and the Council to continue negotiating with the same commitment and complete the rest of the proposals of the Clean Energy for All Europeans Package," said Cañete.
Wind energy trade body WindEurope welcomed the increased goal, adding "this agreement the EU stays in the race for Global competitiveness on renewables".
"The Renewables Directive sets out concrete measures to underpin the delivery of the target. The Directive will provide rules on the design of support mechanisms aimed at providing investor certainty.
"Member States will be allowed to have technology-specific auctions and will have to provide at least five years visibility on public support, including the timing, volumes and budget for auctions," WindEurope said.