London's FTSE 100 closed 0.4 percent higher, the German DAX ended flat, while the French CAC climbed to close over 1 percent higher.
In stocks news, Europe's largest software firm SAPlowered its 2017 operating profit outlook on Tuesday, saying its push into cloud-based software delivery would eat into its profit margins. Shares of SAP were trading down 4 percent Tuesday morning.
Consumer goods giant Unilever reported lower than expected fourth-quarter underlying sales growth, as the emerging market downturn that rocked performance earlier in the year failed to improve. Shares of Unilever were trading down 0.5 percent following the data.
Miner Rio Tinto released fourth-quarter production figures on Tuesday that showed what the company called a "robust" quarter. Global iron ore shipments were up 13 percent in the fourth quarter of 2014, compared to the same period in the previous year. Shares of the miner were down 0.7 percent following the figures.
Global markets are awaiting the ECB's policy decision on Thursday, when it is widely expected to announce a government bond buying plan to stimulate the deflation-hit euro zone.
Germany's chancellor Angela Merkel made a rare public intervention in the debate about money printing by the ECB on Monday, warning it was no substitute for economic reforms in the euro zone, Reuters reported.
The latest reading of the state of the German economy came on Tuesday with the ZEW report. It showed that economic sentiment soared in Germany in January hitting 48.4 points, up from 34.9 in December and reaching its highest reading since February 2014, ZEW said. Analysts had expected a rise to 40.0 points.
U.S. stocks declined on Tuesday, with opening gains quickly evaporating as the price of oil dropped and Johnson & Johnsonreported lower-than-estimated quarterly sales.
In Asia, stock markets were buoyed by China's fourth quarter gross domestic product, which beat expectations. The economy expanded 7.3 percent on year, a tick higher than the 7.2 percent forecast by analysts. However, 2014 growth came in at 7.4 percent, below the government's target "of around 7.5 percent" – the lowest reading since 1990.
Meanwhile, the International Monetary Fund (IMF) trimmed its global growth forecast for 2015-16, cautioning that the boost from lower crude oil prices would be offset by dimmer economic prospects for China, Russia, the euro area, Japan and oil producers.
It expects global growth of 3.5 percent in 2015, versus its previous forecast of 3.8 percent. However, it raised the U.S. growth outlook to 3.6 percent from 3.1 percent.
Brent crude oil prices fell towards $48 a barrel on Tuesday after the International Monetary Fund cut its forecast for global economic growth in 2015 implying lower demand for fuel.
Political and business leaders have descended on Davos in Switzerland for the annual World Economic Forum this week. There will be 40 heads of state and government attending the event including Chinese Prime Minister Li Keqiang, French President François Hollande and German Chancellor Angela Merkel.
Read more on Davos 2015
In other news, investors will closely watch President Barack Obama's State of the Union speech later Tuesday. The hour-long speech is expected to focus on the economy, expanding home ownership and taxation.
Meanwhile in Greece, where elections are to be held next weekend, Syriza, the country's leftist anti-austerity party, appears to be widening its lead over the conservatives that lead the coalition government according to two separate opinion polls, Reuters reported.
Follow us on Twitter: @CNBCWorld