The budget will be set at just over €157bn, an increase from last year of €2.5bn.
The figure finally thrashed out after talks between the EU institutions represents a compromise, as member states had pushed for cuts to the budget for 2017.
The Council gave its formal approval of the conciliation agreement with Parliament on the 2017 budget on Monday.
At its plenary in Brussels on Thursday, Parliament also gave the green light to the budget by 438 votes to 194, with seven abstentions.
It was then signed into law by Parliament President Martin Schulz.
For next year's budget, MEPs say they have ensured better support for unemployed youngsters and additional funds to boost key initiatives supporting SMEs, transport infrastructure projects and research.
For 2017, what are known as "commitment appropriations" total €157.8578bn, and "payment appropriations" €134.49bn.
Ivan Lesay, state secretary for finance of Slovakia, current holder of the EU Council presidency, said, "The 2017 EU budget is a blueprint for the future. It is sound, focused and shows solidarity.
"It delivers on citizens' main concerns by tackling the migration challenges, reinforcing security, boosting growth and creating jobs. And it provides for significant increases to programmes such as Erasmus+ that benefit young people in particular."
MEPs were also swift to react to the outcome of Thursday's plenary vote, with co-rapporteur Jens Geier declaring, "We have reached our aims."
He added, "The 2017 budget clearly focuses on our priorities of boosting growth, creating jobs - especially for youngsters - and tackling the migration crisis.
"The additional €500m we obtained for the youth employment initiative is a clear signal for the EU to act. We have also done our utmost to deal with the root causes of migration."
Greens deputy Indrek Tarand, co-rapporteur on the file, was less impressed, saying it was "deeply regrettable" that the Commission had "failed to put in reserve part of the remunerations" for former Commissioners and releasing it on condition that the code of conduct be made stricter.
This was approved by Parliament with a large majority and aimed to "improve the behaviour of European Commissioners and subsequently the public image of the institutions as a whole."
MEPs and campaign groups have called for tougher rules on former Commissioners after former Commission President José Manuel Barroso recently took up a top job with Goldman Sachs.
Tarand, from Estonia, added, "The proposal that Juncker recently sent to Schulz on improving the code of conduct by prolonging the cooling-off period to two years is a step in the right direction but does not go far enough."
Romanian EPP group member Siegfried Mureşan, said, "We are delivering a good budget under difficult circumstances but, if we are expected to deliver more next year, then of course more resources are needed."
Portuguese EPP group member José Manuel Fernandes noted, "If there wasn't a missing piece in this agreement, it would be perfect."
He was referring to the multiannual financial framework revision, saying, "What the budget needs is flexibility so that the amounts that are in the budget are used and that not a single euro in is wasted."
ECR group spokesperson on budgetary affairs Bernd Kölmel criticised the budget, saying it lacks "visionary new highlights and is merely a continuation of the past.
"Even though a great majority of the Parliament voted for freezing the accession talks with Turkey, €450m will be directed to Turkey as so called pre-accession assistance next year. This is inconsistent and shows that the left hand doesn't know what the right hand is doing", says Koelmel.
"It is of course laudable that there are up to €6bn available now to cope with the migration crisis. However, it is not called into question enough which long-term gains general spending has and if it is still advisable. A lean budget looks different."
Further reaction came from Ukip MEP Jonathan Arnott, a member of the budgetary control committee, who said, "All EU officials have just been given a 3.3 per cent salary increase and now they have approved an austerity-defying EU budget increase. The EU's Christmas stocking is already bursting.
"Ukip has had amendment after amendment calling for budget reductions thrown out. When will they realise the British people voted for this exact thing to stop?"