EU Justice Commissioner Vera Jourova and US Commerce Secretary Penny Pritzker presented the final version of the deal, which replaces one struck down last October by the EU's top court.
The court struck down the deal based on an Austrian activist's case against Facebook in Ireland, and its judgment cited US snooping practices exposed by former intelligence contractor Edward Snowden.
"The EU-US Privacy Shield is a robust new system to protect the personal data of Europeans and ensure legal certainty for businesses," Jourova said.
The deal includes commitments by the US to limit the use of bulk-collected intelligence, the appointment of a US ombudsman to deal with complaints by European citizens, and fines for firms that do not comply.
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The deal will also be subject to an annual review.
"The approval of the privacy deal is a milestone for privacy at a time when the sharing of data is driving growth in every sector," Pritzker told a press conference in Brussels with Jourova.
The deal will enter into force in a matter of hours once European Union member states are formally notified, European officials told AFP.
The old agreement effectively meant that Europe treated the United States as a safe destination for internet data on the basis that Brussels and Washington adhered to similar standards.