The new sanctions mark one of the toughest pushes against Iran by Europe to date, and come amid mounting concerns over the Islamic Republic's military intentions and the failure of diplomacy to solve the atom stand-off this year.
Iran insists its nuclear work has only peaceful dimensions and has refused in three rounds of talks since April to scale it back unless major economic sanctions are lifted.
But governments in Europe and the United States have refused to do so and, instead, are tightening the financial screws against Tehran as fears grow that the nuclear dispute could envelop the Middle East in a new war.
"In the last couple of months Iran has not budged on any of the key issues and we must therefore increase the pressure through sanctions," German Foreign Minister Guido Westerwelle said in Berlin.
Speaking a day before his counterparts meet in Luxembourg to approve new sanctions, he said diplomacy was still an option.
"Our offer to Iran still stands: substantial negotiations with the clear aim of preventing Iran from arming itself with nuclear weapons. It is time for a political solution."
An EU diplomat has told Reuters the new European measures include a ban on financial transactions, with some exceptions for those involving humanitarian aid, food and medicine purchases and provisions for legitimate trade.
In a reversal of existing European policy, the ban will require European traders to apply to their governments for authorisation before they can finance any transactions in allowed goods. Previously, the EU's more narrow approach was to allow trade broadly while banning specific products.
Trade will be hampered further by a new ban on Europeans extending short-term trade guarantees.
EU states will be banned from selling metals and graphites - crucial in steel-making - to Iran. The EU will also ban imports of natural gas from Iran.
The EU is also targeting Iran's shipping industry, in an effort to curb Tehran's ability to sell oil outside of Europe and the United States to obtain hard currency.
New measures will forbid European companies from providing shipbuilding technology and oil storage capabilities, as well as flagging and classification services to Iranian tankers.
Belarus and Syria
At today's Luxembourg meeting, foreign ministers will also extend measures levied against Belarus over human rights abuses, and approve a new round of sanctions against Syria to pressure President Bashar al-Assad to halt violence against rebels.
On Sunday night, EU foreign ministers dined with Sergei Lavrov, foreign minister of Russia, a long-time supplier of arms to Assad's government - though Lavrov said in June that Moscow is not delivering offensive weapons to Syria.
"We must not cease to strive for common solutions to international problems, even when this is very difficult, as with the current conflict in Syria," Westerwelle said.