BRUSSELS—Croatia has moved to defuse a major clash with the European Union just weeks after joining the bloc, with the country's justice minister pledging to ensure that a domestic law committing Croatia to the European arrest warrant complies with EU rules.

Top EU officials had threatened to cut funding to Croatia and impose sanctions on the country if authorities didn't reverse a late June decision to exempt people who committed serious crimes before August 2002 from being extradited to another EU country under the arrest...