But the commission said on Tuesday that the purchase was dependent on the parties surrendering take-off and landing slots notably at Zurich and Frankfurt airports, and other concessions.
"In light of these commitments, the commission has concluded that the transaction would not significantly impede effective competition," said the commission, the executive which regulates competition in the 25 member states.
Lufthansa has said it wants to acquire Swiss to expand its international network and boost its competitive position in Europe.
The purchase, which cost Lufthansa up to $370 million, is the second-biggest merger in the European aviation sector following that of Air France and KLM a year ago.
Germany's flag carrier signed a deal on 22 March to take over its ailing Swiss counterpart, which was created after Swissair collapsed in 2001. Swiss has since faced huge financial problems, battered largely by the unrelenting rise in low-cost airlines around Europe.
The German airline had already received a green light from the Swiss government and corporate shareholders, who together hold 85% of Swiss and have agreed on a symbolic sum for their stock.
Lufthansa and Swiss operate
about 1300 to 1400 flights daily
The approval from the competition authorities, which came a day after a similar clearance from the United States, was the final step in the takeover.
"I welcome airline consolidation in Europe, but it should not lead to higher prices or reduced choice of carrier," said competition commissioner Neelie Kroes.
"The commitments given by Lufthansa ensure that competitors will be able to offer new services in competition with the merged company."
"This is a partnership for all our customers," said Wolfgang Mayrhuber, Chairman and CEO of Lufthansa in a statement. "In just a few weeks time, the customers of our two airlines will be feeling the first benefits that our partnership will bring."
The German and Swiss carriers together operate between 1300 and 1400 daily flights.