The funds will be allocated over three years, with 300 million euros in 2016, and 200 million euros in each of the following years, EU Humanitarian Aid Commissioner Christos Stylianides said.
"No time can be lost in deploying all means possible to prevent humanitarian suffering within our own borders. Today's proposal will make 700 million euros (USD 760 million) available to provide help where it is most needed," Stylianides said in a statement.
If approved by member states and the European Parliament, the plan by the European Commission, the EU's executive arm, would amount to the bloc's first distribution of humanitarian cash within Europe rather than outside the bloc.
The aid plan will also be coordinated for the first time with UN and other aid agencies, the Commission said.
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He did not say how much will be earmarked for Greece, which has asked for around 480 million euros (USD 520 million) to help shelter 100,000 refugees, though he acknowledged Greece earlier as a main concern.
While Greece remains the main entry point for migrants -- 1.13 million of whom have entered the EU since the start of 2015 -- the effects have been felt across the European Union.
The new aid mechanism will be triggered when EU states show their "response capacities are overwhelmed by urgent and exceptional circumstances" such as a refugee crisis but also nuclear or chemical accidents, terrorist attacks or epidemics.