Until now, the force has operated in Somalia's territorial and internal waters. The extension to Somali coastal territory - land along the country's coastline - is aimed at enabling Operation Atalanta to work directly with Somalia's Transitional Federal Government and other Somali entities in their fight against piracy from the coastal area.
An EU official said that the force would still only operate at sea and in the air, though could now target pirates' weaponry and other equipment on land.
Pirates operating from the Somali coast have raked in millions of dollars in ransoms from hijacking ships and a report in 2011 estimated that maritime piracy costs the global economy between $7 billion and $12 billion through higher shipping costs and ransom payments.
"Fighting piracy and its root causes is a priority of our action in the Horn of Africa," EU foreign policy chief Catherine Ashton said in a statement.
"Operation Atalanta has made a significant contribution to this effort, in coordination with our international partners. Today's important decision ... allows it to take more robust action on the Somali coast."
A budget of 14.9 million euros ($19.7 million) will be provided for the joint costs of the extended mandate of Operation Atalanta, which is headquartered in Northwood, in Britain.
The force last year faced a shortage of warships, though not so serious as to stop the mission.
British Prime Minister David Cameron announced in October that British merchant ships sailing off the coast of Somalia would be able to carry armed guards to ward off pirate attacks, bringing it into line with many other countries.