The European Union has granted Ukraine market economy status - seen as a key step to boost trade ties.
President Yushchenko (left) is keen for Ukraine to join the EU
"Market economy status has now been granted," UK Prime Minister Tony Blair said in the Ukrainian capital Kiev.
Mr Blair and other EU leaders also backed Ukraine's bid to join the World Trade Organization.
This is the first summit between the EU and Ukraine since the Orange Revolution a year ago, which brought pro-Western President Viktor Yushchenko to power.
Mr Blair said that despite turbulence, reform in Ukraine was on course.
He said he hoped the Ukrainian people were in no doubt about the difference the last year had made in the way in which Ukraine was perceived in the world.
Mr Yushchenko described market economy status as a "huge step" for Ukraine.
The summit was held on the same day that an EU mission to monitor Ukraine's border with Moldova was starting work.
More than 100 officials will be deployed in the area, which includes the territory of Trans-Dniester, which broke away from Moldova.
It is hoped the project will help prevent the trafficking of weapons, drugs and people.
President of the European Commission Jose Manuel Barroso said Ukraine had "come a very long way in a very short time".
"The next crucial step will be free and fair [parliamentary] elections next March," he said.
Ukraine had hoped to join the World Trade Organization (WTO) this year, but its parliament has failed to pass all the necessary legislation.
Mr Barroso said the EU would encourage the government to address the remaining obstacles on the path to WTO membership, so that work could start on the creation of a free trade area.
In recent months, talks have begun on the relaxation of visa requirements for Ukrainians visiting the EU, and on an agreement under which Ukraine will take back illegal migrants crossing into the EU from its territory.
Ukraine no longer requires EU visitors to obtain visas.
Agreements have also been signed on the exchange of classified information and on Ukrainian participation in EU crisis management operations.
Ukraine is already taking part in the EU's operations in Bosnia and Macedonia.