The European Union has formally offered Serbia the chance to join the 27-member bloc.
At a summit in Brussels, EU leaders agreed to grant Serbia the status of candidate country. Actual membership could take years, however.
European Council President Herman Van Rompuy made the announcement at a late-night press conference.
"We agreed tonight to grant Serbia the status of EU candidate country," Van Rompuy said. "This is a remarkable achievement, a result of the efforts demonstrated by both sides in the dialogue between Belgrade and Pristina. I hope it will encourage Serbia to undertake further efforts to meet the political and economic criteria for EU membership."
Serbian President Boris Tadic welcomed the EU's decision, saying it paved the way for "economic advance and prosperity."
Earlier, the European Parliament urged the EU's executive body to open accession negotiations with Serbia as soon as possible.
Serbia had been expected to get EU candidacy in December after it captured two top war crimes suspects, an issue that had long been a source of tension.
But Germany put the brakes on the move, demanding Belgrade do more to improve relations with Kosovo, which declared independence from Serbia in 2008.
Belgrade has rejected Kosovo's assertion of sovereignty and vowed to challenge it through any legal channels it can.
But last week, Serbia and Kosovo reached a key breakthrough when Belgrade agreed to allow Kosovo to use its flag at regional meetings and sign international agreements like a fully recognized nation.
The two sides also agreed to jointly manage their flash-point border, the scene of clashes in recent months between NATO peacekeepers and Serbs who make up the majority in northern Kosovo.
Serbia was isolated for much of the 1990s after its then-leader, Slobodan Milosevic, was blamed for starting the wars in Croatia, Bosnia-Herzegovina, and Kosovo.
Another Balkan country, Croatia, was given the green light last year to become the EU's 28th member in July 2013.
Kosovo is also establishing closer political and trade links with the EU.
A statement issued in Brussels said the EU would study the feasibility of a trade and political accord with Kosovo, known as a Stabilization and Association Agreement.
With AFP, AP, and Reuters reporting