Kenya is the biggest economy in the East Africa Community
Leaders from five East African nations have signed a common market treaty.
The presidents of Kenya, Tanzania, Rwanda, Uganda and Burundi have agreed to the free movement of people and goods across the region.
It is hoped that the deal will lead to greater economic clout for the region. The common market is due to come into effect by July 2010.
The East African Community was launched 10 years ago and has a population of 120 million.
Will Ross, BBC News, Nairobi
The treaty means that goods and people should be able to move across the region without the current barriers.
For example, a trader in Burundi may decide to sell his or her clothes in Kenya or a Ugandan may wake up and decide to look for a job in Tanzania.
They will be able to do so without paying extra tariffs.
But this treaty is not popular with everybody in the regions.
Some people fear that the Kenyans may dominate because their industry is more advanced.
Tanzania seems especially vulnerable with people there complaining about red tape and business being slow.
The BBC's Will Ross in Nairobi said there had been fears that Kenya, as the economic heavyweight, would dominate.
So until recently Kenya had still been subject to taxes as a way of helping the other countries' industries catch up.
Some analysts suggest that when the agreement becomes operational, Tanzania could be swamped by the better trained workers from neighbouring Kenya.
Our correspondent says businesses in the region are frustrated with the amount of bureaucracy and are pushing for governments to do more to promote trade.
The signing of this common market agreement coincides with the tenth anniversary of the East Africa Community.