Kenyan President William Ruto described the agreement as a "very important milestone," and voiced hope it would be implemented next year.
"Today is a very proud moment for Kenya, and I believe a very proud moment for the European Union," Kenyan Trade Minister Moses Kuria said after signing the agreement with E.U. Trade Commissioner Valdis Dombrovskis.
The Kenya deal is the culmination of trade talks between the E.U. and the East African Community (EAC) that started roughly a decade ago.
Imports from the E.U. to Kenya, such as chemicals and machinery, will receive progressive tariff reductions over 25 years, but some sensitive products will be excluded.
Kenya's main exports to the 27-nation bloc are agricultural products, including vegetables, fruits and the country's famous tea and coffee.
Over 70 percent of Kenya's cut flowers are destined for Europe.
Two-way trade totaled 3.3 billion euros ($3.6 billion) in 2022, up 27 percent since 2018, according to EU figures.
Ruto said Kenya's farmers could be "assured of a predictable market" and the agreement provides new opportunities to boost this trade.
"It ensures a stable market for industrialists, for our farmers, and also industrialists in the European Union," he said.
This is the first broad trade deal between the E.U. and an African nation since 2016 and follows a spending spree by China on lavish infrastructure projects across the continent.
The E.U. has taken steps to counter China's Belt and Road program, announcing in February it would increase investments in Kenya by hundreds of millions of dollars through its own Global Gateway initiative.
In 2014, the EU and the EAC - then Kenya, Rwanda, Uganda, Burundi and Tanzania - finalized negotiations for an economic partnership agreement but only Nairobi ended up ratifying it.
Kenya went its own way but Dombrovskis said the agreement remained open for other members of the EAC - which now includes the Democratic Republic of Congo and South Sudan - to join.
In a briefing with reporters ahead of Monday's ceremony, Dombrovskis said Africa was a "priority region" for the E.U. and he hoped the Kenya deal would resonate elsewhere on the continent.
"Certainly, we think it's going to be a boost," he said of its impact on future trade links with Africa.