The organization also agreed to raise the target by an additional 500,000 barrels a day in August if necessary, they said.
"We have decided to lift the ceiling to 25.5 (million barrels a day) effective July 1 and 26.0 (million barrels a day) effective Aug. 1 and we will meet to review future action on July 21 in Vienna," Saudi Oil Minister Ali Naimi told reporters.
The decision by OPEC representatives in Beirut was a compromise between members led by influential Saudi Arabia who are seeking an immediate hike in production of 2.5 million barrels a day to reach a ceiling of 26 million barrels a day and other producers, such as Iran, who preferred to raise the ceiling in at least two stages.
"We believe there is not any shortage in the market and we should be very careful about the coming months," said Iranian Oil Minister Bijan Namdar Zangeneh.
OPEC representatives from Qatar, Nigeria and the United Arab Emirates confirmed the decision before the group met for a closed-door meeting to ratify the increase. A formal announcement was expected later in the day.
The move came as gasoline prices in the United States were at record levels.
That should change, regardless of the OPEC decision, said Robert Murphy, a senior vice president at Citigroup Global Markets.
"More often than not, you do see the Memorial Day as a short-term peak in prices," he said. "Now that the Memorial Day has come and is gone, the market should start to focus a little bit more on total inventories and right now our total inventories, if you look at historical levels, are relatively adequate."
Encouraging signals from OPEC that it would raise production had the desired effect of lowering record-high crude prices. But that raised the question of how long they would remain lower.
Oil prices plunged 6 percent on Wednesday. The fall came after the United Arab Emirates and Kuwait pledged to join Saudi Arabia in adding fresh barrels to global supplies.
The record price for U.S. crude prices Tuesday followed a suspected al Qaeda assault at the Saudi oil hub of Khobar. The attack — which killed 22 people, mostly foreign oil workers — stunned markets that were already nervous about stretched oil inventories and Middle East tensions.
"I would say that right now you probably have a $5 to $10 premium in the market, just on fear," Murphy told CBS Radio News.
Naimi stressed Wednesday that Saudi Arabia was taking adequate security measures and restated his goal of pushing down prices.
"I assure you that the kingdom and all OPEC members are concerned ... and we don't want high prices," he said in a speech at the Beirut offices of the U.N. Economic and Social Commission for Western Asia.
Under pressure from the United States and other major oil importers, Saudi Arabia had already boosted its actual output by 600,000 barrels a day, independently of OPEC.
The high gas prices in the U.S. have prompted negative, even criminal reactions, reports CBS News Early Show National Correspondent Thalia Assuras: Motorists drive off without paying for their gasoline.
"It's really surprising. You know, you wouldn't think that some people would drive off," Fairfax, Va., gas station attendant Mohammad Zenbrkji said.
But at his station, gas thefts have jumped from perhaps one every two months to one a week.
Deb Hoon, general manager of the Flying J truck stop in Gillette, Wyo., said there have been quite a few gas thefts there recently, and Sheriff Bill Pownall predicts more reports before long, as the summer travel season gets in full swing.
Danville, Va., police say the number of gas drive-offs has more than doubled in the past three months when compared to the same period last year.
Police Lieutenant Mike Mondul said there were 48 reported drive-offs in May, compared to just 21 during the same period last year.