The move is the first EU Joint Programming Initiative designed to address the "grand challenges" which policymakers say cannot be tackled by any one member state acting alone.
National science funding agencies will pool resources and expertise to devise a strategy to find new treatments and preventative measures for age-related illnesses.
Currently, 16% of the European population is over 65, and this figure is expected to reach 25% by 2030. In 2006, it was estimated that neurodegenerative diseases cost European health services approximately €72 billion to treat.
The EU commissioner for research, innovation and science, Máire Geoghegan-Quinn, said demographic changes mean new solutions will be needed to tackle diseases associated with ageing.
She added that Europe's ageing population poses serious economic challenges but also presents opportunities for new products and services.
"By making research more efficient and avoiding duplication of work, the Joint Programme will increase the prospects of real progress in preventing and treating these diseases. The lessons learned will then be used to inform research efforts in other areas," she said.
The European Commission will be supporting the work of the initiative through a coordinating action with an EU contribution of close to €2 million.
Meanwhile, the EU will contribute €21 million for two new research projects on cancer as part of an international consortium focused on genomics. The research will look at mutations to genes associated with cancer and is run by the International Cancer Genome Consortium.