Researchers conducted tests on 750 patients and found that taking three daily doses of the common remedy for four months reduced the number of colds and duration of the illness by an average of 26 per cent.
They said the treatment also cuts the number of recurrent colds suffered by people with weak immune systems or a history of catching several bouts each year by 60 per cent, the Telegraph reported.
Previous studies had suggested that Echinacea could soothe symptoms and cut colds short, but there was only limited evidence it could prevent the illness from ever taking hold.
The new study by the Cardiff University's Common Cold Centre suggests that taking Echinaforce, a common form of the herb extract, could not only reduce the risk of colds but also the amounts of paracetamol patients took while ill.
Echinacea is extracted from the Eastern Purple Coneflower, which is found in North America, and has long been used as a herbal remedy for the common cold.
Echinacea works by fighting viruses, which cause up to 95 per cent of all colds and flu, and studies suggest it can also boost weak immune systems if swallowed.
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Patients mixed 25 drops of Echinaforce or a placebo with water and held it in their mouths for 10 seconds before swallowing it, three times per day over a four month period.
The total number of days spent with flu was reduced from 850 to 672, a "highly significant" change. Those who took the treatment suffered 149 bouts of illness compared with 188 in the placebo group, a difference described by researchers as "borderline significant".
Recurring infections were cut from 100 episodes in 43 patients to 65 episodes in 28 patients, a difference of 59 per cent, the authors said.
The research was published in the journal Evidence-Based Complementary and Alternative Medicine.