- Video report by ITV News Europe Editor James Mates
European leaders have given the green light for the second stage of Brexit talks to begin.
They agreed that talks can now begin on the UK's exit process and a future trade deal at a meeting lasting less than half an hour.
The ruling also gives more details of the terms of the Brexit process being laid down by Europe.
It makes clear that the UK is expected to remain fully compliant with EU rules during the transition period, but will not have any right to play a role in decisions.
Theresa May has applauded the breakthrough as "an important step on the road to delivering the smooth and orderly Brexit that people voted for" as she pledged "rapid progress" on transition talks.
She was congratulated by European Council President Donald Tusk after the EU approved the decision to move forward.
But he also warned it would be "dramatically difficult" to meet Mrs May's target of an exit by 19 March 2019.
The decision by the EU27 to progress to trade talks was little more than a formality, after EC President Jean-Claude Juncker declared last week that "sufficient progress" had been made to move forward.
However, guidelines approved by the bloc at the meeting poured cold water on Brexiteers' hopes for a quick trade deal.
The four-page text promises only work towards a "framework" for a trade deal, with a wait until March before guidelines for the way ahead are produced.
It leaves no doubt that a formal free trade agreement cannot be signed until after the UK has left.
They say that the UK will be expected to respect the four freedoms - including the free movement of people within the EU area - during a transition period expected to start from March 2019.
Britain will be required to follow the EU rulebook in its entirety, and must also abide by European Court of Justice decisions until it is comprehensively outside the bloc, it adds.
German Chancellor Angela Merkel said that the decision to move on to phase two represented "quite significant progress" but warned that the second round of talks will be "even tougher" than the first phase.
The Withdrawal Agreement now needed to be approved by the European Parliament, after which new talks on a future trade deal will start "as soon as possible", said Mr Juncker.
Mr Tusk, the EC President, said the EU will now begin "exploratory" discussions with Mrs May to get more "clarity" on what the Government wants from the UK's post-Brexit relationship with the union.
First priorities will be to translate last week's agreement on the "divorce" issues of citizens' rights, the Irish border and the UK's £39 billion exit bill into a legally binding Withdrawal Agreement and to work out the terms for a transition period to follow the official date of Brexit in March 2019.
EU leaders said it was for Britain to put forward concrete proposals for the kind of trade deal they want, with Dutch PM Mark Rutte saying Mrs May had so far been "holding her cards close to her heart".
In a brief address to European leaders on Thursday, Mrs May stressed her keenness to get on with shaping a "deep and special" future partnership as quickly as possible.
Despite cheers from fellow leaders in Brussels, the Prime Minister was facing fresh criticism from Remainers today as the terms and complexity of exit plans became clearer.
Labour MP Chuka Umunna, on behalf of the Open Britain campaign for close ties with the EU, said ministers are now being confronted with the "sheer complexity and monumental costs" of Brexit.
"The clock is ticking, and we are far away from anything resembling a deal," he said.
"Voters have the right to keep an open mind about whether this is really the best future for our country."
Liberal Democrat leader Vince Cable renewed calls for a referendum on the final deal.
He said: "The people must have a say on the terms of any deal, including the option of an exit from Brexit."
Senior ministers are due to have their first discussion of the "end state" relationship Britain is seeking with the EU in a Cabinet meeting next Tuesday which threatens to expose deep divisions between their visions of the UK's future.
Meanwhile, Mrs May is facing a further challenge to her authority next week when MPs vote on a Government amendment to enshrine the Brexit date of March 29 2019 in law.
Amid predictions that the PM is heading for a second defeat, after 11 Tories rebelled on Wednesday to back a successful motion calling for MPs to be given a meaningful vote on the final Brexit deal, a senior Government source denied that Mrs May was preparing to dump the provision.
The official also said that "no politician should face intimidation or threats" after rebel ringleader Dominic Grieve reported receiving death threats amid calls from hardline Brexiteers for the deselection of those who voted against the Government.
Mrs May left the EU summit early after dinner on Thursday, leaving her 27 counterparts to discuss Brexit and the future of the eurozone on Friday.