The boost in a business activity was once again led by Germany, which posted a 33 month high in output growth.
The Euro zone's statistics office also reported much stronger than expected retail sales, posting 1.3 percent gain year-on-year compared to the fall of 0.4 percent forecast by analysts polled by Reuters.
The divergence in output from Germany and France widened and was "the most striking in history" of PMI surveys, with the exception of early 2013, as France was the only nation to report a contraction in business activity.
(Read more: Euro zone manufacturing activity slows)
Meanwhile, the recovery in Italy gained traction, with output rising at the steepest clip for almost three years.
Services and manufacturers led the strongest run of growth since the first half of 2011 and companies benefited from strengthening market conditions, as new business rose for the seventh straight month.
National data saw Germany replace Ireland at the top of the PMI output growth table, as economic activity in Germany rose at the steepest pace since May 2011, underpinning solid job creation.
"The survey suggests the region is on course to grow by 0.4-0.5% in the first quarter, which would be its best performance for three years," said chief economist at Markit, Chris Williamson.
(Read more: Recovery in euro zone business activity loses steam)
"There was good news on the employment front too. Although only marginal, the increase in headcounts was nevertheless the first improvement seen since 2011," he said.
"Perhaps the best news came from Spain, which is enjoying its best quarter of growth for seven years, and Italy, where the rate of growth hit a near three-year high," he said.
PMI data gauges business activity across thousands of companies and is seen as a good guide to economic health. A reading above the 50-point mark indicates expansion.
The euro zone economy grew faster than expected in the fourth quarter of 2013 amid signs of a narrowing gap between the region's strongest and weakest members.
Official data, published by Europe's statistics agency Eurostat on Tuesday confirmed that the economy of the 18-country group that uses the euro expanded by 0.3 percent over the period compared with the previous quarter -- above analyst forecasts of 0.2 percent.
—By CNBC's Jenny Cosgrave: Follow her onTwitter @jenny_cosgrave