The decision was made at an European Taekwondo Union (ETU) Executive Committee meeting in Athens, at which Sport Taekwondo UK and the British Taekwondo Control Board (BTCB) presented their bid to the federation.
The news gives a massive boost to the sport in Britain and a significant opportunity for the British team to finalise their preparations for the London Games.
Jeremy Beard, chairman of Sport Taekwondo UK said: "This is fantastic news for Taekwondo fans across the UK and provides us with a real chance to showcase the sport at a time when excitement will be growing ahead of the Olympics.
"It also recognises Sport Taekwondo UK's ability to stage world class events and indeed Manchester's reputation as global sporting capital.
"Interest in the European Championships will be significant and we are looking forward to working with partners to deliver what will be a truly memorable event."
Adrian Tranter, the chairman of BCTB, said: "I am delighted that my ETU colleagues have entrusted us to deliver the 2012 European championships just 12 weeks before the London Olympic Games.
"I have the utmost confidence that the Sport Taekwondo UK events team, headed by Ian Leafe, will make it the best ever European Championships and that our British team will make it one to remember.
"I know that the British Taekwondo family will welcome our friends from across Europe and will also be out in force to support our home team."
Aaron Cook, the current European champion and world number, said: "The European Championships is always such an important event on the calendar and one we really look forward to.
"Having the event in Manchester gives the British team a great chance to get valuable experience and to win medals on home soil.
"To win a gold in front of our own fans would be amazing and I know that the British team will go all out to put on a great show."
Dates for the 2012 European Taekwondo Championships will be announced in the coming weeks.
The British International Open will be staged at Sportcity, Manchester on October 1-2, 2011.