European Commission President Jose Manuel Barroso made the announcement following President Barack Obama's State of the Union address.
A deal would bring down trading barriers between the two biggest economies in the world.
EU-US trade is worth around 455bn euros (£393bn; $613bn) a year.
Mr Obama announced US support for talks as part of his annual address to Congress on Tuesday, saying a free-trade deal would "boost American exports, support American jobs and level the playing field in the growing markets of Asia".
In a joint statement, US and EU leaders said trade between the US and EU supported millions of jobs on both sides of the Atlantic.
"We are committed to making this relationship an even stronger driver of our prosperity," the statement said.
The EU estimates that a "comprehensive and ambitious agreement" will boost annual GDP growth by 0.5%.
It is not clear how long the talks will take, but similar trade deals have involved years of negotiations.'Protectionist pressures'
The idea was discussed following the formation of a working group in 2011, and the formal talks may begin in the summer, EU Trade Commissioner Karel De Gucht said.
He said the deal would focus on bringing down remaining tariffs and other barriers to trade, and standardise technical regulations, standards and certifications.
Free trade between the US and the EU has been under informal discussion for years.
Previously politicians have been discouraged from pursuing free trade deals for fear of exposing domestic industries to greater competition from abroad.
But Steve Davies from the Institute of Economic Affairs, a think tank, said the economic crisis in Europe has injected more urgency into the talks.
"It's happening now because there has been seriously depressed growth in the EU, and this will be good news for economic growth," he said.
"On the American side, the critical factor is that Obama is now in his second term, so he doesn't have the protectionist pressures from US businesses to worry about."
Mr Davies said agriculture was likely to be particular area of contention, along with intellectual property, which could lead to political wranglings on both sides of the Atlantic.