The non-binding measure demanded that all hostages be released and that Hamas be dismantled to call for a cease-fire and a return to efforts to find a political solution to the conflict.
"While condemning in the strongest possible terms the despicable terrorist attacks committed by Hamas against Israel, they also denounce the disproportionate Israeli military response, which has caused a civilian death toll on an unprecedented scale," the parliament said.
The resolution also called for a European initiative that puts "the two-state solution back on track and emphasizes the absolute necessity of immediately relaunching the peace process."
The resolution supports the Arab Peace Initiative of 2002, which calls for ending Israeli occupation of Palestinian territories and stresses that Israeli West Bank and Jerusalem settlements are "illegal under international law."
The EU Parliament said the Arab peace initiative is a path to "full normalization of relations between the state of Israel and all Arab states in return for Israel's full withdrawal from all Palestinian and Arab territories occupied since 1967."
The resolution said the members of parliament also strongly condemn "the rise in extremist settler violence committed against Palestinians and call for EU restrictive measures to be imposed on extremist settlers violating human rights and international law."
Going beyond the call for a cease-fire, the EU resolution envisions a comprehensive peace strategy, but it hinged on the dismantling of Hamas and unconditional release of hostages.
Those conditions are very difficult to achieve while the Israel-Hamas war rages.
The resolution came as Israeli President Isaac Herzog told the World Economic Forum that "nobody in his right mind is willing now to think about what will be the right solution of the peace agreements" as Israel continues to face threats from Hamas and Hezbollah.
He, however, said that normalizing relations with Saudi Arabia was key to Israel's strategy to exit the war but added that negotiations with Hamas are "out of the question."
The European Council on Tuesday sanctioned Yahya Sinwar, Hamas' political leader who is believed to have been involved in planning and executing the Oct. 7 attack on Israel that sparked the war, citing the group's threat to EU member states.
In November, the EU agreed to continue providing financial aid to Palestinians in Gaza after conducting an audit to confirm that the funds were not being funneled to Hamas after $728 million in aid to the Palestinian Authority was suspended shortly following the start of the war.
The EU is the largest international aid donor to the Palestinian people, providing $1.4 billion in support through the European Joint Strategy through 2024.
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