Montenegro has formally declared independence from its union with Serbia in a special session of parliament in the capital, Podgorica.
Speaker Krivokapic (r) shouted: "Long live Montenegro!"
There were public celebrations, but a fireworks display on Saturday evening was spoilt by heavy rain.
The move officially recognises the result of a referendum two weeks ago, when a slim majority backed the move.
But correspondents say Montenegro is a divided society, with a significant minority backing the union with Serbia.
The last time the region was a country was at the end of World War I, before it was absorbed into the newly-formed Yugoslavia.
The red-and-gold Montenegrin flag, dating back to that period, was flown after the speaker Ranko Krivokapic declared: "Long live Montenegro!"
The anthem "Oh, The Bright May Dawn" was played in the parliament chamber.
The country hopes independence will make it more prosperous
Earlier this week, the Montenegro Referendum Commission formally confirmed the result of the referendum, in which 55.5% of the people voted to secede from Serbia, just above the necessary threshold of 55%.
Negotiations between Belgrade and Podgorica on how to disentangle the two states are expected to begin shortly.
They will include everything from property rights and university fees to military facilities and work permits.
Serbian President Boris Tadic sent a message of congratulation wishing the people of Montenegro "peace, stability and overall prosperity".
"Serbia will be the closest friend," he went on.
"I am in favour of preserving family, historic, cultural, economic and political ties, because they present an unbreakable bond between our two countries."
Next week Serbia is expected to declare its own independence, finally bringing to an end the break-up of the six republics of the former Yugoslavia into six fully-fledged states.