Fallon, which already handled Skoda’s UK advertising, won the account after seeing off Leagas Delaney’s Prague office and 18 Feet & Rising in the final stages of the pitch. Amsterdam Worldwide and Kaspen/Jung von Matt were also involved in the earlier stages of the pitch.
Fallon will now establish an office in Prague, where Skoda is headquartered, to service the account.
Leagas Delaney Prague was the incumbent on the account, which it had held for around 10 years. Leagas Delaney Hamburg will continue to handle Skoda's local advertising in Germany.
18 Feet & Rising is also being considered for a place on a group-wide roster at Volkswagen.
The EU-wide account is thought to be worth around €3.5 million (£2.85 million) in fees alone, and one of Fallon's first tasks will be to help launch Skoda’s new-model Fabia later in the year.
James Townsend, Fallon's managing director, said: "We're delighted to take this next step with Skoda - as our oldest client in the UK, we have a special relationship with the brand. We are also thrilled to be opening up in Prague where we hope to deliver world-class creative work for Skoda across the globe."
Fallon has held Skoda’s UK account since 1999, and made spots including "cake", which won a Gold Lion at Cannes in 2008.
MediaCom handles the media planning and buying for Skoda, and for other brands in owner Volkswagen’s stable.
Campaign first reported on Skoda's EU-wide pitch in November 2013.