The EU's competition watchdog gave a conditional green light on Friday for a $33 billion offer by Mittal, the world's leading steel producer.
The EU commission ruled out nagging doubts over the buyout by saying it would not harm competition for most steel products, except for heavy beams.
It said Mittal had offered solutions to address these concerns.
"In light of the remedies submitted, the commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EAA) or a significant part of it," a statement said.
The bid has faced strong opposition for several months from countries such as France, Luxembourg and Spain, where Arcelor has major interests, as well as from unions and politicians as well as Arcelor's own directors.
In what analysts saw as a manoeuvre to fend off a raid by Mittal, Arcelor announced plans to acquire Russian steel group Severstal last week.
The $15.3bn deal would give more than a third of Arcelor's shares to the Russian steel magnate Alexei Mordashov in exchange for Severstal and a large cash payment.
The move had been denounced by Mittal steel as well as some Arcelor shareholders.
The EU panel said the deal will not
harm steel products' competition
An Arcelor-Severstal merger would create the world's biggest steel group.
Arcelor chief executive Guy Dolle disclosed in Madrid on Friday that investors holding 29% of the group's shares were seeking a special general assembly to vote on the proposed tie-up with Severstal.
Mittal Steel said on Wednesday that nearly 30% of Arcelor shareholders backed a special meeting in order to modify procedures governing approval of the Arcelor-Severstal merger.
In another development on Friday, Mordashov, who appeared at the Madrid press conference with Dolle, said he could not accept a situation in which there would be two major shareholders in Arcelor, namely Mittal and Severstal.
"It would create big tension to have two big shareholders," he insisted. "We can't allow a situation like that."
In Luxembourg earlier on Friday, a spokesman for Mittal Steel said the Netherlands-based company had sent a plan to Arcelor management laying out its vision of the venture's future.
The management of Arcelor has always maintained that it could not fully evaluate Mittal's plans for the company without the document.
To satisfy regulatory demands, Mittal has offered to sell off two Arcelor heavy and medium steel mills, one in Germany and the other in Italy, and a Mittal mill in Poland, together with commercial and distribution assets.
Mittal is registered in Amsterdam and run from London by the Indian-born steel tycoon Lakshmi Mittal.