The decision is the third bailout granted to a eurozone country in the past year, after the EU and IMF put together a €110-billion package to Greece last May and an €85-billion programme for Ireland in November.
It is first time a country has asked private investors not to sell down their holdings of bonds on a voluntary basis. It reflects growing pressure on EU leaders to broaden out the burden of bailouts from taxpayers to the banks that hold so-called peripheral euro debt.
In a statement, the EU said the programme would cover financing needs of up to €78 billion, shared equally (€26 billion each) among the European Financial Stability Facility, the European Financial Stability Mechanism and the International Monetary Fund.
"At the same time, the Portuguese authorities will undertake to encourage private investors to maintain their overall exposures on a voluntary basis," the statement said.
Portugal's bailout will involve loans to provide budget support, aid with reforms and help with recapitalising banks.
Ministers are expected to agree that Portugal will pay an interest rate of between 5.5 and 6.0% for its loans.
That is in line with the borrowing cost set by the initial euro zone agreement on emergency funding through the European Financial Stability Facility (EFSF), rather than a more favourable EFSF lending rate EU leaders suggested in March.
Euro zone leaders lowered Greek loan rates, originally about 5.2% , to 4.2% in March. But the 5.8% on loans to Ireland was not cut, because of a dispute over its company tax rate, which France and Germany see as too low.
Portugal is also expected to embark on an ambitious privatisation programme to strengthen its public finances.
Both the request to private investors and the privatisation programme were conditions set by Finland last Friday for their support of the bailout. All euro zone bailouts must be unanimously approved by all 17 euro zone member states.
The request to bondholders appears similar to the Vienna Initiative of the European Central Bank, the European Bank for Reconstruction and Development, regulators and banks with subsidiaries in central and eastern Europe from January 2009.
The initiative launched at the height of the financial crisis triggered by the collapse of investment bank Lehman Brothers, was to ensure that parent bank groups publicly commit to maintain their exposures and recapitalise their subsidiaries in central and eastern European countries as part of financial aid packages from the European Union and the IMF.
Of EU members, Latvia, Hungary and Romania received such packages and IMF data shows that the commitments of banks under the initiative have been honoured.
IMF head Dominique Strauss-Kahn, who has been at the heart of negotiations on all three euro zone bailouts, had been due to attend the meeting but was detained by police in New York over the weekend on accusations he tried to rape a hotel maid.
Strauss-Kahn was represented by Nemat Shafik, Assistant Director General for operations at the IMF.
Should the Frenchmen be forced to resign his post, it would probably not affect any of the bailouts in the short term, but it could have a longer term impact if it leads to a change in the nature and style of the IMF's involvement.
In his nearly four years at the IMF, Strauss-Kahn is seen as having made the organisation less doctrinaire when it comes to providing assistance to struggling countries.
(EurActiv with Reuters.)