The decline reported by Eurostat, the EU's statistics office, was in line with market expectations and follows the 0.2 percent fall recorded in the second quarter. As a result, the eurozone is technically in recession, commonly defined as two straight quarters of falling output.
The eurozone economy shrank at annual rate of 0.2 percent during the July-September quarter, according to calculations by Capital Economics.
Because of the eurozone's three-year debt crisis, the region has been the major focus of concern for the world economy. The eurozone economy is worth $12.1 trillion, which puts it on a par with the United States. The region, with its 332 million people, is the largest U.S. export customer, and any falloff in demand will hit order books.
While the United States has managed to bounce back from its own recession in 2008-09, albeit inconsistently, and China continues to post strong growth, Europe's economies have been on a downward spiral and there is little sign of any improvement in the near term. Last week, the European Union's executive arm forecast that the eurozone's economy would shrink by 0.4 percent this year and grow by only 0.1 percent in 2013.
The eurozone had avoided returning to recession since the financial crisis after the collapse of U.S. investment bank Lehman Bros., mainly thanks to the strength of its largest economy, Germany.
But Germany's economy grew just 0.2 percent in the third quarter, down from 0.3 percent in the previous quarter. Over the last year, Germany's annual growth rate has more than halved to 0.9 percent from 1.9 percent.
Germany's Chancellor, Angela Merkel, tried to strike a positive note when she spoke to reporters in Berlin Thursday.
"I think we all are working on getting back on our feet again rapidly," she said.
Perhaps the most dramatic decline among the eurozone's members was seen in the Netherlands, which has imposed strict austerity measures. Its economy shrank 1.1 percent on the previous quarter.
Five eurozone countries are in recession - Greece, Spain, Italy, Portugal and Cyprus. Those five are also at the center of Europe's debt crisis and are imposing austerity measures, such as cuts to wages and pensions and increases to taxes, in an attempt to stay afloat.