The account covers all of the company's brands in Denmark, Sweden, Finland, the UK, Greece, Poland, Russia, Norway, Germany, the Netherlands and Spain.
Carat picks up the German part of the business, which was previously run by OMD. MEC has retained the Greek market. Carat was the incumbent for the remaining markets.
The Dentsu Aegis Network agency fended off Maxus in the final stage, while OMD pitched for the Germany and Netherlands markets at an earlier stage of the process, which was handled by Media Path.
Arla Foods' gross spend across the European markets is approximately £100 million.
Nick Henley, the group client partner at Carat, said: "We're delighted that Arla has once again chosen Carat as its partner.
"We’ve outlined a strategy for growth and demonstrated that we are well equipped to drive business results in a world where innovation and digital play an important role in an increasingly convergent world."
The pitch was run by Arla Foods' head of global media and agency management, Jan Worre Pedersen.
Pedersen said: "All agencies have delivered extremely well during this pitch, and we are confident that we with the outlined future agency set-up are very well equipped to further strengthen Arla Foods’ marketing effectiveness, and thereby deliver the highest possible milk price to our owners, namely the farmers."