EU ministers have reached agreement on a draft deal tearing down barriers to cross-border provision of services.
The directive would open catering to greater cross-border competition
The Services Directive is seen as a key step towards completion of the EU's single market as services make up 70% of the economy, but only 20% of trade.
The European Parliament voted in favour of a watered-down version of the directive in February.
On Monday, the 25 states accepted a new draft from the European Commission, heavily based on the parliament's text.
The directive must go back to parliament for a second reading, possibly before the end of the year.
"With great satisfaction I can tell you that we were able to get a breakthrough on the services directive," Austrian Economy Minister Martin Bartenstein, who led the talks, said late on Monday.
EU Internal Market Commissioner Charlie McCreevy, who proposed the new text, said few people would have believed last year that any agreement was possible.
"If you were a wagering person... you would have got very long odds against that occurring," he added.
Austria, the holder of the EU's rotating presidency, had been pressing other member states in Brussels to agree a formal position.
Diplomats said Germany lobbied hard for an agreement.
The member states were earlier said to be split over an Austrian proposal for member states to screen each others' legislation, and to compile a register of restrictions imposed on foreign service suppliers.
AFP news agency says the screening proposal was supported by the new member states, which were disappointed when the European Parliament voted down a proposal allowing service providers to follow the rules of their home country when operating abroad.
The so-called "country of origin" principle would have made it easier for companies in the new member states to undercut their rivals in richer states, and to drive down prices.
AFP quoted a diplomatic source, who explained that the screening proposal was designed as a "sort of compensation" for the loss of the country of origin principle.
However, Germany's junior Economics Minister Joachim Wuermeling said it would create a "huge bureaucratic burden".
The European Commission's new version of the directive differs from the parliament's by including legal services in the scope of the legislation.
But according to Reuters, France wanted notaries excluded from the draft directive.
The earlier version of the directive - known in France as the Bolkestein Directive after former internal market commissioner Frits Bolkestein - helped prompt French voters to reject the EU constitution in a referendum exactly a year ago.
Earlier this month, UK Trade Minister Ian McCartney said the new rules would be worth about £5bn (7.3bn euros) per year to the British economy, "boosting services such as management consultancy, advertising, estate agency and leisure services, and bringing benefits to a wide range of businesses, consumers and jobseekers".
In 2005, 116 million people - nearly 70% of the EU's work force - were employed in the service sector.