Mr Sarkozy also announced hundreds more French troops for Afghanistan
President Nicolas Sarkozy says France will make a decision on Nato by the end of the year, indicating it will return to the organisation's military command.
He told a Nato summit the move would come at the end of France's six-month EU presidency later this year.
France withdrew from Nato's military structure in 1966 in protest at the dominance of US commanders.
The summit will discuss links with Georgia and Ukraine after Nato said it would not offer them membership.
France and Germany had opposed US calls for the two former Soviet republics to be allowed to join the alliance.
At the second day of the summit in Bucharest, Romania, Mr Sarkozy said: "I reaffirm here France's determination to pursue the process of renovating its relations with Nato.
"At the end of the French [EU] presidency [on 31 December this year] the moment will have come to conclude this process and to take the necessary decisions for France to take its full place in Nato's structures."
France withdrew from Nato in 1966 over US dominance in the alliance
Analysts say France's full return to Nato could be formally announced at the alliance's next summit in April 2009.
France has not taken full part in Nato's integrated military command since former president Charles de Gaulle withdrew, although it rejoined the military committee more than a decade ago.
Mr Sarkozy also confirmed on Thursday that France would deploy a battalion - about 800 troops - to eastern Afghanistan, easing fears of a crisis within the Western coalition there.
France currently has 1,430 troops in Afghanistan as part of a 47,000-strong Nato force.
US President George W Bush said the move would free up some of its troops to bolster Canadian forces in the south.
Canada has threatened to withdraw its contingent in Kandahar province unless other Nato countries sent reinforcements.
On Thursday, Mr Bush and UK Prime Minister Gordon Brown are expected to urge more Nato members to commit troops or extra resources to the battle against the Taleban.
The BBC's Jonathan Marcus in Bucharest says Mr Sarkozy's announcement is a piece of good news after the summit atmosphere was poisoned by a night of diplomatic wrangling.
Mr Bush had wanted Nato membership invitations to three new members - Albania, Croatia and Macedonia.
He had also sought membership action plans for Georgia and Ukraine, a kind of enhanced partnership that would set them firmly on the path to Nato membership.
But the Americans seem to have badly judged the mood, says our diplomatic correspondent.
Greece strongly opposed Macedonia's membership due to a dispute over the country's name.
Germany and France resolutely opposed closer ties with Georgia and Ukraine.
And there was sufficient support for the objectors to thwart US ambitions.
Our correspondent says damage limitation is now the order of the day - Albania and Croatia will be asked to join.
Nato spokesmen insist Macedonia will get its invitation once the name issue is resolved and a membership action plan for Georgia and Ukraine is not a matter of if, they say, but when.