Many passengers have been forced to discard bottles before boarding
The EU says the current restrictions on liquids carried by air passengers will end by April 2013.
New screening equipment capable of detecting liquid explosives must be installed by that deadline, the European Commission says.
Since late 2006 European airports have banned any liquid in containers larger than 100ml carried in hand luggage.
The term "liquid" includes syrups, creams, gels and pastes. The rule has been frustrating for many passengers.
The ban was brought in after UK police foiled a plot to blow up transatlantic planes using explosives hidden in soft drink bottles.
Passengers have been forced to throw away bottles of perfume, tubes of sun cream and other liquids before boarding planes.
Only 100ml maximum containers, carried in a transparent bag measuring 20cm by 20cm, have been allowed.
The Commission says that in three years' time "all liquids will be allowed in cabin baggage and will be screened".
"By that date, the current restrictions on the carriage of liquids in cabin baggage will end. The transition period until 2013 is necessary to allow for a roll-out of liquids screening equipment at all EU airports."
The Commission is also streamlining other airport security measures brought in since the 11 September 2001 attacks on the US.
The EU is scrapping the duplication of security controls for access to strictly controlled areas at EU airports.
EU-wide procedures are coming in for air cargo hauliers, again to avoid re-screening.