Milk quotas in the EU are to be scrapped completely by 2015
Europe's dairy farmers are to be allowed to sell more milk to cope with increasing demand for their products.
Milk prices have soared in recent months, in common with other farm products but also because of EU quotas.
EU ministers meeting in Brussels decided to raise quotas by two percent from April in the face of opposition from Germany and Austria.
The German government argues that raising production will bring prices down and hit rural farmers hardest.
But most EU member states backed the change which will bring an extra 2.84m tonnes of milk onto the market.
Milk quotas were introduced across most of the bloc in the 1980s because of the so-called milk-lakes which developed when farmers were producing more than Europe could consume or export.
Now the European Commission estimates that between 2007 and 2014, there will be added demand of 8m tonnes of dairy products in EU member states alone, particularly for cheese.
Dairy producers are also keen to tap emerging markets and the Polish and Dutch governments are in favour of a bigger increase in quotas.
BBC Brussels correspondent Dominic Hughes says part of the growing demand has come from India and China as a result of rising living standards and changing eating habits.
High quality cheeses
EU Agriculture Commissioner Mariann Fischer Boel said it was important for European farmers to take advantage of the new markets, particularly with their cheeses.
"If high quality EU products do not show up from the very beginning, it will be very difficult to came back at a later stage," she said.
Germany says that while prices did surge last year, they have since fallen back.
"I don't want to see new milk lakes and butter mountains," said German Agriculture Minister Horst Seehofer.
The EU hopes to abolish the quota system altogether in 2015 but is keen to adopt a "soft landing" approach so as not to harm sensitive areas of the industry.
Berlin is most concerned about farmers in mountainous areas who would be unable to switch to non-dairy production if there were a sudden glut in dairy stocks.
The commission says quota levels will be reviewed every year until they are abandoned.