Yaz, which has been available in the United States since 2006, will be launched in all major European markets in autumn 2008. "We are absolutely thrilled with the pan-European approval of Yaz," Philip Smits, head of Bayer's Women's Healthcare unit, said in a statement.
Shares in the group posted modest gains in early Frankfurt trades, while the Dax index of blue-chip stocks was essentially flat overall.
Bayer said Yaz had been approved in the US "for three distinct indications: contraception, treatment of moderate acne as well as treatment of the emotional and physical symptoms associated with PMDD (Premenstrual Dysphoric Disorder)."
Those symptoms included "mood swings, irritability, anxiety, food cravings, breast tenderness, bloating, and headache," the company said.
The European green light was a boost for Bayer, the maker of Aspirin, which has suffered a string of legal, regulatory and development setbacks.
In early March, a US court ruled against a patent for Yasmin, another form of the oral contraceptive that, along with Yaz and Yasminelle, were Bayer's best-selling pharmaceutical products in 2007, generating revenues of €1.04 billion ($1.62 billion).
That ruling came after Bayer was forced to halt sales of its anti-bleeding drug Trasylol, an unfavourable study regarding use of its Betaferon treatment for multiple sclerosis and a complaint by the drug group Novartis against the Bayer drug Kogenate, used to treat haemophilia.
Finally, advanced tests of Nexavar, Bayer's potential "blockbuster" treatment for lung cancer, ended in failure.
On Tuesday, Bayer shares showed a gain of 0.42 percent to €55.20 in morning trading, while the Dax index had slipped by 0.08 percent overall.