Agreement has been reached in a wrangle between the European Commission and Israel over goods made in Palestinian territories in the West Bank and Gaza.
Israeli settlers' products face EU tariffs
Goods produced in Israeli settlements in the occupied territories will no longer be allowed to enter the EU tariff-free under the new agreement.
Under the deal, goods exported by Israel to the EU will be labelled with a town of origin as well as nationality
The goods, including palm oil and fruit juice, are worth $200m (£110m) a year.
Goods produced in the occupied territories are not covered by a trade agreement signed in 2000 between the EU and Israel, which offers low or zero tariff access.
Brussels said labelling goods made in Palestinian areas as "made in Israel" was a breach of the agreement.
In 2002 it told importers they should collect deposits on the goods which could be liable to duty.
The new agreement, which was opposed by Israel's settlers, was signed in Brussels after eight months of negotiations, the Israeli foreign ministry said.
The range of goods produced on the settlements includes fruit-based products, plastics and low-tech
'Major threat' averted
Jewish settlements are one of the most contentious issues between Israel and the Palestinian authority.
About 400,000 settlers live in the West Bank (including Jerusalem) and Gaza. The EU considers the settlements illegal but Israel disputes this.
As part of the new accord, Israel will mark export goods to the EU with a town of origin as well as the nationality, an Israeli official said.
There would then be an EU customs duty to pay on items made in the occupied Palestinian territories.
Israel's vice prime minister Ehud Olmert said the accord
would ward off "a major threat to the continued export of Israeli products to the 25 countries of the European Union".
The deal also covers goods made in the Golan Heights, which is occupied Syrian land, and East Jerusalem.