The Common Fisheries Policy, which dates back to the 1970s, is widely regarded as a failure.
It has allowed subsidised, industrial-sized fleets to devastate fish stocks, while eurosceptics have scorned it as bureaucratic.
The revised policy, to take effect in 2014, will enforce sustainable catch limits - meaning fishermen can catch no more than a given stock can reproduce in a year.
It will also end the practice of discards: throwing undersized fish or unwanted species back into the sea, where they usually die anyway.
While the broad outlines of the new policy are in place, some details still have to be negotiated.
It will then need final parliamentary approval as well as endorsement from the EU's 27 governments including Britain, which is debating looser ties with the bloc.
Eurosceptics there have called for more regional management of fish stocks and the right to control access of other European fishing vessels to British waters. The country's fisheries minister said on Wednesday the reform still needed work.
EU Fisheries Commissioner Maria Damanaki said she was "especially pleased with the parliament's support for a policy that is based on exploiting fisheries resources sustainably".
Some 80% of Mediterranean and 47% of Atlantic stocks are overfished, European Commission figures showed.
German MEP Ulrike Rodust, who led the debate in parliament, said the reform should mean fish stocks recover by 2020, allowing fishermen to harvest an extra 15 million tonnes and creating 37,000 new jobs.
Campaign groups hailed Wednesday's vote as a breakthrough.
"It's a very easy paradigm. Without fish, there is no fishing, no jobs - but everyone will have to overcome their greed. That's the mind shift," said Markus Knigge, adviser at Pew Environment Group.
"You have to look at fisheries not like a mine, but like a field. You have to cultivate it, not just take fish out."