European Commission chief Jean-Claude Juncker said the proposed measures would "ensure that people in clear need of international protection are relocated swiftly after arriving -- not just now but also for any crisis in the future."
Under the proposals, 120,000 refugees will be relocated from Greece, Italy and Hungary -- three EU nations at the forefront of the crisis, thanks to transit routes across the Mediterranean and through the Balkans.
Of those, 15,600 will come from Italy, 50,400 from Greece and 54,000 from Hungary, the European Commission said.
They would be distributed among other EU states according to binding quotas based on each country's population, GDP, past asylum applications received and employment rate. Additional EU funding would be provided to countries taking in refugees.
The figure of 120,000 is on top of a proposal by the European Commission in May to relocate 40,000 people in need of international protection from Italy and Greece.
EU member states must still agree to the proposals. Their interior ministers are due to met Monday to discuss the issue.
Some, such as Hungary, Poland, Slovakia and the Czech Republic -- have already voiced strong opposition
to the idea of mandatory quotas.
But others, including Germany, say it is the only way to ensure a fair distribution of refugees among EU member states.
Addressing EU Parliament members, Juncker said: "We Europeans should know and should never forget why giving refuge and complying with the fundamental right to asylum is so important."
The new measures will institute a truly European approach and ensure that people in clear need of help receive it swiftly, he said.
"If ever European solidarity needed to manifest itself, it is on the question of the refugee crisis. It is time to show collective courage and deliver this European response now."
Germany: Europe faces a big test
The measures proposed by the European Commission also include a permanent relocation mechanism for all EU members and the establishment of a common EU list of safe countries of origin. Nations such as Albania, Kosovo, Serbia and Bosnia should be added to this, it said.
These steps would speed up the process of individual asylum applications from individuals coming from countries considered to be safe across Europe.
The European Commission also proposed a more effective returns policy for those migrants who do not have the right to stay in the European Union.
And it said renewed efforts were needed to look for political solutions in Syria, Iraq and Libya, and to support the countries around Syria, such as Jordan, Lebanon and Turkey, which are hosting the bulk of those who've fled its civil war.
On top of this, the commission has allocated 1.8 billion euros for a "Trust Fund for Africa," it said, in a bid to limit migration from African nations where populations have few opportunities.
German Foreign Minister Frank-Walter Steinmeier and Economics Minister Sigmar Gabriel said in a joint statement that Europe "faces a big test" but the "brave proposals" of the European Commission were heading the right way.
"Only if we all pull together, can we manage to handle the large number of refugees appropriately. We need a European refugee policy, which will live up to the expectations of the people and the expectations of Europe," they said.
Europe has to shoulder its responsibility for refugees with a spirit of solidarity and ensuring a fair distribution, the statement said.
It's also important to tackle the root causes of migration, such as conflict and poverty, and develop a convincing plan of action on a European level, they said.
New guidelines for migrants' treatment
Amid concern over the welcome -- or lack thereof -- given to some migrants, the Council of Europe issued new guidelines Wednesday to its 47 member states on their treatment of the new arrivals.
The recommendations address "the reception and temporary living conditions of migrants and asylum seekers, to ensure respect for their human rights," the body's secretary general said.
"The ongoing migrant crisis is creating unprecedented challenges for European states," Secretary General Thorbjorn Jagland wrote in a letter
to member states. "A minority of countries is being asked to absorb the majority of incomers and political solidarity is being severely tested."
Jagland added that "many of the incomers are asylum seekers whose requests to stay in Europe will be accepted," and said "it is self-defeating to mistreat or demean any future member of our societies."
Jagland also commissioned an urgent analysis to improve the prosecution of those involved in human smuggling.
The Council of Europe is an intergovernmental organization made up of 47 European countries that have signed up to the European Convention on Human Rights, a treaty designed to protect human rights, democracy and the rule of law.