Belgrade broke off ties with the United States, the UK, France and Germany in March last year, when Nato began its bombing campaign to force the Yugoslav military out of Kosovo.
The move is the latest in a series of steps taken by the new government of Vojislav Kostunica since the downfall of former President Slobodan Milosevic in October.
"This will represent another important step forward in normalising our relations with Yugoslavia under the new Kostunica government", said Daniel Cruise, a spokesman for the National Security Council.
A new British ambassador is expected in Belgrade early next year, while the Americans say their embassy will be back to full strength by June.
'Must cooperate'
Just one day before the Yugoslav announcement, however, a US official emphasised that Yugoslavia would have to co-operate with the war crimes tribunal in The Hague in order to secure US aid.
President Kostunica has refused to say he will hand over former President Slobodan Milosevic to the tribunal, which has indicted him for war crimes.
Mr Kostunica has instead suggested that Mr Milosevic face justice in Yugoslavia.
Yugoslavia has moved swiftly to rejoin international institutions since the fall of Mr Milosevic.
The country was re-admitted to the United Nations at the beginning of November after eight years of exclusion from the world body.
European institutions
And in the last week alone, Mr Kostunica has addressed the Council of Europe and the European Parliament, where he said Yugoslavia aimed to join the EU.
He told the Belgrade radio station B-92 he was surprised at how positively the international community had received him.
The Yugoslav Government is also expected to open ties with Slovenia for the first time.
Slovenia was the first country to secede from the former Yugoslav federation, and has never established diplomatic relations with Belgrade.