It has also reduced its deposit rate below zero, to -0.1%, which means commercial banks will have to pay to lodge their money with the central bank, rather than receive interest.
The idea is to incentivise the banks to lend to businesses, thereby stimulating growth.
The ECB is the first of the "Big Four" central banks (the ECB, the US Federal Reserve, the Bank of Japan and the Bank of England) to do this.
Howard Archer, chief UK and European economist at IHS Global Insight said: "Despite being widely anticipated and in some quarters criticised for occurring too late, it is still a bold and unusual move by the ECB to take its deposit rate into negative territory."
"There has to be considerable uncertainty as to how effective negative deposit rates will turn out to be," he added.