Most of the UK's remaining troops in Bosnia-Hercegovina are to be withdrawn, defence minister Adam Ingram has said.
British troops had been supporting the Dayton Peace Accord
More than 600 troops, mostly Welsh Guards, will come home due to the improved security situation, he said.
A small number of staff officers will remain in Sarajevo, and Britain will contribute to the pan-Balkans Operational Reserve Force.
The troop withdrawal is part of a larger reduction of international forces from 6,000 to 2,500 troops.
In a statement to the House of Commons, Mr Ingram admitted there were high levels of small arms and light weapons in the country, but there were international initiatives to reduce these.
He added: "It is clear that the Bosnia-Hercegovina is becoming increasingly safe. In recent years there have been increasing indications of a security situation approaching normality."
But he said military operations had not been without significant loss.
A series of commemorative events are to be held to honour the 55 British personnel who died and the thousands who served there.
Although the EU peacekeeping force Eufor is being reduced, the international community overseeing the 1995 Dayton Peace Accord said it was retaining the office of the High Representative until June 2008.
It said the reforms it wanted had not yet been fully implemented.
Shadow defence secretary Liam Fox said: "If Bosnia are incapable of taking more control of their own affairs at a political level, how confident are you that they can do it on a military level?"
'Job well done'
He said neighbouring Serbia was still unstable and that there was a suspicion that more troops were being freed up for Afghanistan.
But Mr Ingram said that charge did "not add up" and said he was surprised Dr Fox had not recognised that there had been "marked progress".
For the Liberal Democrats, Nick Harvey added: "The House should be celebrating the statement today as a sign of success and a job well done."
Around 250,000 people died in the inter-ethnic war of 1992-95.
Initially British troops served with the United Nations, and then under Nato command until Eufor took responsibility for safeguarding peace in 2004.
The chairman of Bosnia's tripartite presidency, Nebojsa Radmanovic, said the country could now ensure stability and reform by itself.
On Wednesday the EU said Eufor would be reduced but a "robust military presence" would remain and troop levels would be increased "if needed" over the next six months.
Conservative MP Tobias Ellwood, who served in Bosnia, welcomed the statement but there were "lessons to be learned".
He said in Bosnia, there was one Nato soldier for every square kilometre while in Afghanistan, there was one for every 600 sq km.
That was why the UK faced "so many challenges" in the country, he said.