European Central Bank (ECB) President Mario Draghi said the Governing Council's decision to cut rates was not unanimous.
The ECB, under pressure to address weak inflation and a stagnant recovery, cut its main refinancing rate by 10 basis points to 0.05% and the deposit facility by another 10 basis points taking it to -0.20%.
The central bank has also agreed to start buying non-financial assets through an asset-backed security programme.
At a press conference following the announcement, Draghi said the package will be launched in October 2014 with the aim of improving lenders' balance sheets, thus encouraging them to provide credit.
The decision followed an assessment of a recent batch of disappointing data. The ECB cut its growth forecasts for 2014 to 0.9%, down from a previous estimate of 1%. The 2015 growth forecast was also taken down a notch to 1.6%, from 1.7%. The 2016 forecast, on the other hand, was raised to 1.9% from 1.8%.
Draghi highlighted that inflation remained well below the ECB's target of close to but below 2%, blaming energy prices and the appreciation of the exchange rate.
Annual Eurozone inflation hit 0.3% in August, compared to 1.7% in July 2012. Excluding food and energy inflation is now 0.9% versus 1.7% in July 2012.
While the ECB does not see deflation on the horizon, it expects annual inflation to remain at low levels for an extended period.
Ahead of the meeting Draghi was expected by markets to hint at the possibility of full-blown quantitative easing (QE) measures to boost the euro-area's economy after remarks made at last month's Jackson Hole meeting.
However, he stressed on Thursday that his comments were blown out of proportion, reiterating that fiscal and monetary stimulus would have no effect without strong structural reforms.
Draghi said QE was discussed at the meeting with some for and against the proposal.
He said the ECB would continue to monitor the risks to inflation, including geopolitical movements amid the crisis in Ukraine, and consider unconventional measures within its mandate if necessary to address problems. Other risks include high unemployment and weak credit growth, Draghi added.
Joshua Mahony, analyst at Alpari UK, said: "Ultimately, with the growth of geopolitical threats, primarily driven by further sanctions on Russia, growth is almost certain to be on a downward trajectory and as such, it is right to front run such a move and attempt to prop up the economic recovery in the Eurozone.
"The introduction of ABS provides yet another indication that the ECB is moving towards quantitative easing and the clear willingness of certain members within the governing council to push for such a measure means the expansion of the ECB balance sheet could just be beginning."
The euro plunged 0.95% to $1.3023 following the announcement.