The Belgrade government and the Kosovo authorities have agreed to hold direct talks on practical issues, the first since the Kosovo war.
The announcement was made at a summit of European Union and Balkan leaders near the Greek city of Thessaloniki.
Belgrade is coming into the fold
EU leaders also mapped out the standards Balkan states must meet if they wish to join the body eventually.
Kosovo has been administered by the United Nations since 1999, after Nato bombed Serbia to end the repression of majority ethnic Albanians in the province.
"This is really good news," said EU foreign policy chief Javier Solana, who, as Nato secretary general, oversaw the military campaign to drive Serbian forces out of Kosovo four years ago.
Announcing that the talks would start in July, the President of Serbia-Montenegro, Svetozar Marovic, said: "We want to assure all European nations that we have the vision, the patience and the strength to solve the problems of the past."
It is unclear where the talks will be held but EU officials said one possible venue was Brussels.
The agenda will cover practical issues, including energy and transport links, but also the return of Serbian refugees to the troubled province.
What it will not deal with is Kosovo's future or ethnic Albanian calls for independence.
No-one in the EU is prepared to accept those claims.
But, once talks get under way between Belgrade and Pristina, the international community may not be able to avoid a decision on Kosovo's final status for much longer.
The EU has brought Balkan leaders together for this summit to promise them membership of the club if they keep their commitments to reform and overcome ethnic strife and this is a clear sign that the message is getting through.
European reunification will not be completed until the Balkans have become full members of the EU, said the President of the European Commission, Romano Prodi.
This process, he stressed, is irreversible.
But it will not be easy - or cheap.
On top of the billions of euro they have already spent on rebuilding the region after a decade of conflict, EU leaders have pledged over 200 million between 2004-2006 to help prepare the Balkans to join the club one day.
That, says a statement adopted at the summit, is the big challenge ahead, and it adds:
There must be greater progress towards a market economy and democracy and the rule of law
Organised crime and corruption are a real obstacle to democratic stability
The return of hundreds of thousands of refugees throughout the region is a high EU priority
From next year, the EU will draw up "European Partnerships" containing detailed timetables for reforms for each of the five countries - Albania, Bosnia-Hercegovina, Croatia, the former Yugoslav Republic of Macedonia and Serbia-Montenegro.
It will also offer more expertise and technical help to help them achieve EU standards.
Political dialogue with the region will also be boosted, with particular focus on fighting illegal migration and organised crime.
Italy, which is taking over the EU presidency from Greece in July, will be hosting a meeting of EU and Balkan justice and home affairs ministers.
War crimes issue
The EU continues to insist that all countries in the region should extradite indicted war criminals to The Hague.
But it is concerned about US pressure on fragile Balkan states to sign bilateral deals exempting all US citizens from the new International Criminal Court, which is strongly supported by the Europeans.
Bosnia and Albania have already signed such agreements, while Macedonia is considering one.
But the EU has only limited leverage, since it cannot offer any of these countries a clear timetable for accession.
Diplomats believe that only Croatia, which has already applied for membership, could join the EU by the end of the decade.