The EU's Consumer Affairs Commissioner Meglena Kuneva said experts and industry will together draft tougher standards to limit hearing loss.
"If you want to enjoy your favorite songs in 20 or 30 years time, turn the volume down," Kuneva said.
Action is necessary because there is cause for concern over health risks, especially to younger people, she said.
An EU scientific advisory body says that between 2.5 million and 10 million Europeans could suffer hearing loss from listening to MP3 players at unsafe volumes - over 89 decibels - for more an hour daily for at least five years.
The EU's executive commission said the maximum sound levels of players now being sold range between 80 and 115 decibels. Using different earphones could add to those levels by up to 9 decibels. Above 120 decibels is equivalent to the level of noise generated by an airplane taking off.
"The use of personal music players at high volume settings over a sustained time can lead to permanent hearing damage," said Kuneva. "We need to make sure consumers, particularly young people, are aware of these risks."
Kuneva said the new standards would see new players include a maximum sound level default at 80 decibels. However users could still switch that default off if they wanted to.
She said the risk of hearing damage also depended on the length of time users listen to music and urged manufacturers to beef up health warnings with players sold, either in instruction manuals or on the product itself.
Manufacturers welcomed the move, but said they would have to study the best way on how to issue better health warnings.
Bridget Cosgrave, director general of DigitalEurope, said the safety of consumers "remains our highest priority."
DigitalEurope represents digital technology associations and companies that do business in Europe, including Sony, Panasonic and Apple, makers of the industry leading iPod.
Regulators are expected to finalize the new standards over the next year, Kuneva said.
Apple has already moved in recent years to upgrade software and iPods to limit volume levels after France passed a law capping sound to 100 decibels for music players.
The company also ships a warning with each iPod that cautions "permanent hearing loss may occur if earphones or headphones are used at high volume."
Sales of digital players has jumped in recent years, and some 50 to 100 million people are believed to listen to them on a daily basis, the EU says.