"Based on the results of its market investigation, the Commission concluded that the proposed transaction would raise no competition concerns", said a statement.
It will report back to the United Kingdom government by May 16, leaving a final decision on whether to block the deal with Culture Minister Karen Bradley.
Rupert Murdoch's £11.7bn bid to take full control of Sky has been cleared by the European competition regulator.
However, the £18.5bn deal could still face regulatory obstacles in the United Kingdom, where Sky is based.
"The Commission found that the proposed transaction would lead to only a limited increase in Sky's existing share of the markets for the acquisition of TV content as well as in the market for the wholesale supply of TV channels in the relevant Member States", the Commission said in a statement.
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The European Union's executive body, which reviewed the transaction for antitrust issues, gave it unconditional approval after concluding the proposed transaction raised no competition concerns in Europe.
21st Century Fox in a statement Friday welcomed the EU's green light for its deal as it now turned to the United Kingdom regulatory review. The Murdoch clan have long wanted full control, though the News of the World phone-hacking scandal in the 00s thwarted those ambitions for years due to the public outrage over the actions of journalists and contracted private investigators.
As the companies are mainly active in separate markets, there would be little horizontal overlap in the combination of Rupert Murdoch's Fox, a Hollywood film studio and TV channel operator, and Sky, the leading pay-TV operator in Austria, Germany, Ireland, Italy and the United Kingdom, the European Commission said.
The European Commission, which is scheduled to decide on the deal on Friday, declined to comment.
The EU unconditionally cleared a News Corp. takeover of Sky in 2010, which was later abandoned in an outcry over revelations of News Corp. phone hacking.