The EU Commission gave the green light on Friday for Croatia to join the union, with membership likely to start in 2013.
EU Commission President Jose Manuel Barroso said he would recommend that EU nations to wrap up talks and prepare to welcome Croatia as the 28th member state.
The Commission said the negotiations with the Balkan nation could be wrapped because talks on reforming the Croatian judiciary have been successful.
"Croatia is now ready to move ahead," Barroso said. He suggested that the current member states should add Croatia on July 1, 2013. The EU leaders could give their political backing at a meeting on June 24.
Justice Commissioner Viviane Reding said the negotiations with the Balkan nation could be wrapped up because talks on reforming the Croatian judiciary have been successful.
"They are on track and we can give, with a very calm and good heart, a 'yes' to Croatia," Reding said.
Croatia started membership talks around six years ago, and would become the second former Yugoslav nation to join following Slovenia.
Barroso said the tough negotiations also sent a clear signal to other aspiring EU members in southeast Europe.
"It shows that enlargement works, that the EU is serious about its commitment, and that structural European reforms in the countries pay off," Barroso said.
With Croatia poised to take the step and Montenegro and Macedonia candidates for membership, all eyes are turning to Serbia.
The arrest and extradition of war crimes suspect Ratko Mladic late last month removed the largest obstacle that Serbia faced in seeking entry into the European Union and membership talks could start next spring.
Barroso said he hoped "that Croatia's progress is an inspiration to our other partners to reinvigorate their reform efforts."
Serbia can look at Croatia as an example.
The EU kept Croatia's membership application on ice for years until it improved its cooperation with the U.N. war crimes tribunal. In 2005, the government helped track fugitive Gen. Ante Gotovina and extradite him to the court in The Hague, Netherlands. But legal and human rights issues remained among the most thorny to solve.
"You know that the last stumbling bloc was the judiciary. I didn't believe last year that the Croatians could do it. But in one year time, they completely reformed the judiciary and made it irreversible," Reding said.
"It was hard work. They have done it," she said.
Croatian Prime Minister Jadranka Kosor said the country's goal is to complete its EU accession talks this year when it marks the 20th anniversary of independence from the former Yugoslavia.
The breakthrough comes at a time when some Croatians have soured on the EU following in the drawn-out accession process and Gotovina's recent conviction on war crimes charges.
The Hague tribunal in April sentenced Gotovina to 24 years in prison for his role in a 1995 military offensive intended to drive Serb rebels out of land they had occupied for years along Croatia's southern border with Bosnia.
After his conviction, thousands of Croatian war veterans massed in Zagreb and ripped EU flags and denounced Croatia's pro-Western government, which has made EU membership its mantra.