From next year, three fully manned US combat brigades will be deployed.
The BBC's diplomatic correspondent says it is the most significant US reinforcement of Nato since tensions flared over Russian action in Ukraine.
Last month the Pentagon announced plans to quadruple its budget for European defence in 2017.
The additional presence will increase US ability to conduct military exercises in the region.
The plan demonstrates "our strong and balanced approach to reassuring our Nato allies and partners in the wake of an aggressive Russia in eastern Europe and elsewhere", said Gen Philip Breedlove, the senior US commander in Europe.
"Our allies and partners will see more capability. They will see a more frequent presence of an armoured brigade with more modernised equipment in their countries," he added.
'Division's worth of stuff'
Each brigade will rotate through the region for nine months before being replaced.
There are about 4,500 soldiers in a brigade, bringing with them military vehicles and other equipment.
"There will be a division's worth of stuff to fight if something happens," Deputy Secretary of Defence Robert Work told the Wall Street Journal.
Relations between Russia and the West have plummeted since Russia annexed the Ukrainian peninsula of Crimea in March 2014.
The intervention sparked fears that Russia was considering other incursions into neighbouring countries.
British Foreign Secretary Philip Hammond told Reuters on Wednesday the situation in Ukraine had "gone backwards over the last few months, with more and more violations of the ceasefire".
Russia has accused Nato of using the situation in Ukraine as an excuse to move closer to Russian borders.
"Stories are being spread that Russia will send its tanks into the Baltic states, into Sofia or into Budapest. No-one intends to do that," Russia's Deputy Defence Minister Anatoly Antonov told German public broadcaster Deutsche Welle.
Some analysts suggested the US military could be planning for the post-Obama era.
The frontrunner to be the Republican nominee for the presidential election, Donald Trump, has strongly attacked the economic cost of US foreign policy.