Croatia has been given the go-ahead to become a member of the European Union, and is likely to join in 2013, the European Commission has said.
Commission President Jose Manuel Barroso said he would recommend EU nations wrap up talks and prepare to greet Croatia as the 28th member state.
Talks on reforming the Croatian judiciary, a very sensitive area, had been successful, Mr Barroso said.
Croatia will be the second ex-Yugoslav country after Slovenia to join.
"The European Commission has just proposed... to close the last four chapters in the accession negotiations with Croatia," Mr Barroso said in a statement.
"Today is a historic day for Croatia and the European Union."
Mr Barroso described the move as "a signal to the rest of south-eastern Europe".
"I... hope that Croatia's progress is an inspiration to our other partners to reinvigorate their reform efforts and to deliver to the benefit of their people."
Two other countries of the former Yugoslav federation, Montenegro and Macedonia, are currently candidates for membership.
Serbia is expected to start membership talks next year, after the arrest last month of former Bosnian Serb army chief Ratko Mladic on war crimes charges removed the biggest obstacle Belgrade faced to joining the EU.
The four outstanding chapters in Croatia's talks included the judiciary and competition issues.
Correspondents say judicial issues are especially sensitive because the last EU countries to join - Bulgaria and Romania in 2007 - failed to meet full EU standards in that area.
The EU imposed a monitoring mechanism on them to deal with the shortcomings.
Croatia applied for EU membership in 2003 and formal negotiations began in 2005.
But the BBC's Mark Lowen, reporting from Zagreb, says progress was marred by initially sluggish co-operation with the UN War Crimes Tribunal in the Hague, as government officials appeared slow to hand over documents relating to the 1990s war of independence.
Corruption and organised crime have also dented the country's image, he adds.
EU leaders are expected to approve Croatia's accession at a summit on 23-24 June.