European Union leaders gave Serbia the go-ahead on Friday to start negotiations by January on joining the bloc, capping a remarkable transformation in the prospects of the former Yugoslavia since the wars of the 1990s.

The decision rewards Belgrade for an April deal to improve relations with its ex-province Kosovo, which broke away from Serbia in a 1998-99 guerrilla war.

EU leaders also agreed Brussels should launch negotiations with Kosovo on a so-called association agreement, which covers trade, economic and political relations and is a step on the path to eventual EU membership.

The leaders agreed talks with Serbia would start by January 2014 at the latest.

"We are at a historic moment for the Balkans and for Europe as a whole," European Council President Herman Van Rompuy told a news conference, noting that the decisions on Serbia and Kosovo came as Croatia prepares to join the European Union on Monday.

"These... decisions are an immediate result of the courageous agreement Belgrade and Pristina reached last April," said Van Rompuy, who will travel to both capitals on Monday.