EU foreign ministers agreed Monday to lift the last of the bloc's trade, economic and individual sanctions against Myanmar, hailing "a new chapter" with the once pariah state.
"In response to the changes that have taken place and in the expectation that they will continue, the Council (of ministers) has decided to lift all sanctions with the exception of the embargo on arms," said a statement approved without a vote.
"The EU is willing to open a new chapter in its relations with Myanmar/Burma, building a lasting partnership," it added.
The European Union began easing sanctions against Myanmar a year ago as the military, in power for decades, progressively ceded power to civilians and implemented wholesale reforms of the economy.
Ministers noted, however, that there were "still significant challenges to be addressed", in particular an end to hostilities in Kachin state and improving the plight of the Rohingya people.
New York-based Human Rights Watch (HRW) said Monday that Myanmar has waged "a campaign of ethnic cleansing" against Rohingya Muslims, citing evidence of mass graves and forced displacement affecting tens of thousands.
HRW Asia head Phil Robertson said lifting the sanctions was "premature and regrettable", warning that the move lessens leverage over Myanmar.
Myanmar views its population of roughly 800,000 Rohingya as illegal Bangladeshi immigrants and denies them citizenship.
To help Myanmar's economy, the EU will look at the feasibility of a bilateral investment agreement, as well as more development assistance.
To help it deal with inter-communal violence, the EU is also studying the possibility of assisting reform of the police service, in partnership with its parliament, the statement said.
In April last year, foreign ministers agreed to a one-year suspension of measures targeting almost 500 individuals and more than 800 firms to bolster a reform process which the same month saw opposition leader Aung San Suu Kyi's election to parliament.
Among the sanctions, hundreds of people were targeted by a travel ban and asset freeze, while on the economic front the EU had barred investments and banned imports of the country's lucrative timber, metals and gems.
During a visit to Brussels last month, the first by a Myanmar head of state, President Thein Sein urged the EU to lift sanctions, saying "we are one of the poorest countries in the world".
He received pledges of EU economic assistance coupled with calls to protect his country's ethnic minorities.
Since the former premier took over the presidency in March 2011, hundreds of political prisoners have been released and elections held.
EU development aid since has more than doubled to around 150 million euros ($195 million) for 2012-2013.