The European Commission says it has decided that both types of energy can classify as "sustainable investment" if they meet certain targets.
But the move has divided the EU, and been fiercely opposed by some members.
Austria's chancellor responded to the news by saying "nuclear power is neither green nor sustainable".
"I cannot understand the decision of the EU," Karl Nehammer said.
He said he would back his environment minister, Leonore Gewessler, in pursuing legal action at the European Court of Justice if the plans go ahead.
"This decision is wrong," Ms Gewessler said. "The EU Commission today agreed its greenwashing programme for nuclear energy and [the fossil fuel] natural gas."
Luxembourg has also said it will join in legal action.
The EU has set itself a goal of becoming climate neutral by 2050 and the Commission argues that to get there, a great deal of private investment is needed. Its proposals are meant to guide investors.
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