Fox already owns a 39% controlling stake in Sky, but is bidding to buy the remainder of the company.
The commission said the £11.7bn deal "raised no competition concerns". It said there was no reason to think a deal would see Fox restricting rival companies from accessing its content, nor that Sky would stop buying content from other providers.
It also decided that national regulations, in the UK, Austria and Italy, would protect rival companies from being "shut out" of broadcast platforms.
The Commission's announcement had been widely expected.
Its specific remit is to analyse the impact of this deal on competition in Europe and consider whether consumers would be faced with higher prices or a worse service. It concluded that neither of those things was likely to happen.
However, the deal still has to be cleared by the UK media regulator OFCOM. Its decision will not be revealed until the middle of May, and today's European announcement specifically said that it would not prejudice OFCOM's deliberations.
Fox put forward its deal in December, offering £10.75 per share - an offer that values the company at £11.7bn. That offered shareholders a premium of around 40% above the share price as it stood on 6 December, the last day of trading before the bid was lodged.
At the time, Fox said that the deal "would enhance Sky's leading position in entertainment and sport, and reinforce the UK's standing as a top global hub for content generation and technological innovation".
That offer was approved by the company's independent directors but was then referred to OFCOM by the Culture Secretary Karen Bradley, who said she had concerns related to media plurality and the company's commitment to broadcasting standards.
OFCOM is also holding an analysis into whether 21st Century Fox is "fit and proper" to hold a UK broadcast licence.
If OFCOM does register concerns then Mrs Bradley will have to decide whether or not to accept undertakings, provided by 21st Century Fox, into how to resolve those difficulties.
Even If the regulator reports no concerns, Mrs Bradley still has the final say on whether or not to give the go ahead.
It is more than five years since a previous bid for Sky was abandoned, following opposition from politicians. That bid was lodged by News Corporation (Frankfurt: A1W048 - news) , which has since been broken into two companies.
The modern News Corporation owns publishing assets around the world, including The Sunday Times, The Sun, The Wall Street Journal and the New York Daily News, as well as the publisher HarperCollins.
The other company is 21st Century Fox, which owns the Fox television company, 20th Century Fox film studio, and also manages the 39% stake in Sky.
Since the collapse of the 2011 deal, Sky has grown after taking full control of Sky-branded services in Germany, Austria and Italy, deals that were approved by European regulators.
Fox has argued that the media landscape has profoundly changed in recent years due to the widening reach of companies such as Facebook (NasdaqGS: FB - news) , Netflix (Xetra: 552484 - news) and Amazon.
The recent devaluation of the pound, following Brexit, has made a takeover more attractive to Fox, which earns the majority of its money in dollars.