BBC news, Pristina
Thousands of ethnic Albanians packed into Pristina to celebrate what they regard as the birth of Europe's newest country.
Kosovo's new yellow and blue flag has been unveiled
Kosovo's capital's main street was a sea of red with most people wearing and waving the flag of Albania.
Despite the bitterly cold weather, many arrived hours before the declaration, viewing this as a defining moment for Kosovo.
''This is a climax, I can't believe I am seeing my dream come true,'' said Driton Ademi, a 23-year-old student.
The declaration of independence was made in Kosovo's parliament by the Prime Minister Hashim Thaci.
Outside there were no loud speakers or big screen for the crowds, so when the historic announcement was made it took some time to filter through.
'What we fought for'
Then there was a wave of excitement.
A few guns were fired into the air, but most of the noisy celebrations came from firecrackers and fireworks.
Glasses of champagne and slices of cake were handed amongst the crowd.
The stars and stripes along with union jacks were dotted among the revellers.
Kosovo's independence has been co-ordinated with the United States and the European Union.
For some in Kosovo, the declaration marks a new beginning
''Thank you USA, thank you. I am free of Serbia, my grandchildren are free of Serbia.,' said 72-year-old Beqir Peci who had a large American flag draped over his shoulders.
Independence day has also been a time for reflection.
A decade ago thousands of ethnic Albanians were killed in a conflict with Serb forces.
''This is what we fought for. We knew we would achieve what we wanted,'' said 51-year-old teacher Rifat Ademi.
''Albanians have gone through horror to come to this point. We thank everyone who supported us. We thank United States of America, United Kingdom, Europe and everyone,'' said Teuta Bokshi, a housewife from Pristina.
For many, Sunday marks an exciting new beginning.
Just after the declaration of independence, Kosovo's new blue and yellow flag was unveiled.
''I know what my identity is. I feel ecstatic that I will now have a name and that's Kosovan, from the Republic of Kosovo,'' said 20-year-old student Besmir Kuqi.
Just a couple of hours after the declaration, the new Kosovo flag could be seen flying proudly on the streets of this new European capital.