A statement adopted by the 25-nation EU says an immediate cessation of hostilities should be followed by a sustainable ceasefire.
The final text of the declaration came after three hours of wrangling between EU foreign ministers at an emergency meeting in Brussels.
Britian, Germany, France and the Netherlands rejected arguments for an immediate ceasefire.
But Finland, the current holder of the EU presidency, claimed that there is no difference between a cessation of hostilities and immediate ceasefire.
“For the people living in the region it means that this threat is removed and there will be no shooting. From the point of view of the people there’s no difference,” said Erkki Tuomioja, the Finnish Foreign Minister.
Positive step
Mr Tuomioja expressed hope that the EU text had laid the foundations for a peace plan to be reached at the United Nations.
The ministers have urged the UN Security Council to convene rapidly to pave the way for a peacekeeping force.
"We are now engaged concretely for both the political solution and the international force. So we have the outlines of a comprehensive peace plan now and I believe that this represents a step forward," Mr Tuomioja said.
"Once such a framework has been established -- and we are hopefully talking more about days rather than weeks -- EU member states have indicated their readiness to contribute to such an operation," he said.
French Foreign Ministe Philippe Douste-Blazy welcomed the EU agreement.
It builds on a draft document that France has been circulating at the UN and he hailed it as an act which showed the EU bloc had spoken with "one voice."
"It is an important step," he said, calling it "an important victory for French diplomacy."
In their conclusions, the ministers also expressed solidarity with Lebanon and called on all parties to ensure "secure and efficient passage for the delivery of humanitarian assistance."
After the meeting in Brussels, the EU External Relations Commissioner, Benita Ferrero-Waldner, emphasised the importance of helping the civilians caught in the conflict.
UN tries to resolve splits
The major UN powers face a new struggle to reconcile differences on ending the Middle East conflict, despite mounting international pressure to take the lead in halting the fighting.
Ambassadors from the five UN Security Council permanent members and UN Secretary General Kofi Annan have held "frank discussions" on the Middle East crisis at a special breakfast meeting, the UN said.
But it was not immediately clear whether the permanent council members - Britain, China, France, Russia and the United States - would unite behind one resolution on the conflict.
Mr Annan is said to have asked them to set their differences aside.
The major powers want to call a meeting of foreign ministers on Lebanon.
But Britain's UN ambassador Emyr Jones Parry told reporters "I don't see at the moment prospects for an early ministerial meeting here."
France has drafted a resolution calling for an immediate cessation of hostilities but for no international force to be sent to the southern Lebanon battleground until a political settlement is agreed between Israel and Hezbollah.
Meeting "premature": France
The French foreign ministry later said a meeting of potential troop contributors for a multinational force in Lebanon, rescheduled for Thursday at the UN, is still premature because the conditions for deployment have not been met.
"The meeting should take place when the conditions have been fulfilled," spokesman Denis Simonneau said.
The meeting - which some 40 countries are expected to attend - was originally planned for Monday but was pushed back to Thursday.
Speaking on condition of anonymity, a French diplomat in New York told AFP that France will not attend the meeting.
France is pushing for an immediate ceasefire by Israel and Hezbollah and a negotiated settlement on the ground before any multinational force is sent in.
By contrast the United States wants a rapid reaction force to move in early.
US stance
The United States is refusing to call for an immediate end to the fighting, but wants an international force sent in quickly after any resolution is passed, according to US officials.
The ambassadors "discussed the cessation of hostilities, a ceasefire and political framework for a settlement, the composition and deployment of a stabilisation force for Lebanon and the humanitarian situation," said a UN statement.
"We are still discussing how to proceed," US ambassador John Bolton told AFP as he left the meeting at Mr Annan's residence in New York.
US Secretary of State Condoleezza Rice said Monday that she would "push very hard" for a ceasefire agreement by the weekend.
International calls for a ceasefire have mounted, particularly after the killing of more than 50 people, including many children, in an Israeli strike on the Lebanese town of Qana on Sunday.
Peres in Washington
Israel's Deputy Prime Minister Shimon Peres has made a round of appearances in Washington, saying Israel might need "weeks" more of fighting to deal with Hezbollah militants in Lebanon.
Mr Peres' comments seemed to be at odds with those of US Secretary of State Condoleezza Rice, who expressed the hope Tuesday that intense diplomatic efforts might produce a ceasefire in "days, not weeks."
Mr Peres said Israeli forces had destroyed 70-80 percent of Hezbollah's long-range missiles and were "very near" to dealing the Islamic group a decisive blow.
"It may take a week, it may take two weeks, it's a matter of weeks, maybe even less," he said after meeting with US National Security Adviser Stephen Hadley.
Secretary Rice appeared more eager for a quicker cessation of hostilities in a television interview on PBS.
"Certainly, we're talking about days, not weeks, before we are able to get a ceasefire," she said. "It's time to end the violence."
Later Israeli Prime Minister Ehud Olmert said Israel will keep fighting Hezbollah in south Lebanon until a strong international force is deployed.
Mr Olmert said the peacekeepers should have a mandate to enforce a UN resolution for the disarmament of Hezbollah, adding that Israel's offensive had already "entirely destroyed" the group's infrastructure.
Qana outrage sparks more protests
There have been more protests against the Israel’s assault on Lebanon and the killing of civilians.
London campaigners carrying placards resembling gravestones took a 35,000-signature petition to the office of Prime Minister Tony Blair.
Backed by the Muslim Council of Britain and major aid agencies, the petition demanded an immediate ceasefire.
The protestors are want emergency aid to be allowed to reach Lebanese civilians.
In Saudi Arabia, a group of 850 women activists signed a statement pressing the international community for a halt to what it called Israel's "genocide" in Lebanon and Gaza.
On the Indian Ocean island of Mauritius, 50 people including ministers and members of parliament demonstrated against what they said was "state terrorism" by Israel.
Malaysia said an emergency meeting this week of 20 of the Muslim member states of the Organisation of the Islamic Conference (OIC) would call for an immediate ceasefire in the Middle East.
Malaysian Foreign Minister Syed Hamid Albar said the body would discuss a UN peacekeeping force for Lebanon, and that it would call for Islamic countries to participate in the force.