The leaders of Kosovo and Serbia have committed to resume EU-hosted talks on improving diplomatic relations.
The breakthrough pact between the Balkan neighbours includes opening up rail and road transit and a focus on job creation, according to a "joint statement'' issued by the office of EU foreign policy chief Josep Borrell.
Serbian President Aleksander Vucic and Kosovo Prime Minister Avdullah Hoti said that they "attach the highest priority to EU integration and to continuing the work on the EU-facilitated Belgrade-Pristina Dialogue which is a key element of their respective EU paths.''
Vucic and Hoti also said they "committed to redoubling their efforts to ensure further EU alignment in accordance with their respective obligations.''
But the agreement falls short of mutual recognition - something Pristina has been pushing for since it declared independence from Belgrade in 2008.
The meeting in Brussels is taking place just days after an unexpected White House-brokered agreement to normalise economic ties.
Serbia signed to move its Israeli embassy to Jerusalem while mutual recognition was achieved between Israel and Kosovo.
On Monday, both sides said the US agreement could provide "a useful contribution" to future comprehensive dialogue.
But Balkan analyst Đorđe Bojović said the Washington talks were more about Donald Trump's campaign ahead of November's presidential election than securing a settlement between Kosovo and Serbia.
"It was primarily for Trump's flagging electoral campaign, he massively needed a foreign policy win," Bojović told Euronews.
"The so-called Washington agreement is not an agreement in itself ... it clearly lacks a political framework".
'No member state with Jerusalem embassy'
The EU has also warned Serbia and Kosovo over their U.S. talks, which could threaten the bloc's long-held policy that broader peace negotiations over Jerusalem’s status are needed between Israel and the Palestinians.
“There is no EU member state with an embassy in Jerusalem,” European Commission spokesman Peter Stano said on Monday.
“Any diplomatic steps that could call into question the EU’s common position on Jerusalem are a matter of serious concern and regret.”
EU-facilitated negotiations between Serbia and Kosovo began in 2011, but stalled in November 2018 and only resumed this summer after a parallel U.S. negotiating effort began.
Đorđe Bojović says the Brussels-led meeting is focused on how the two states can continue on the path to EU membership - even if the goal of full recognition is still a very long way off.
"Serbian officials have not yet shown they are ready to step up on the recognition of Kosovo."
A rare spat between Serbia and Russia
Serbian President Vucic has also hit back at Russia after a controversial social media post by a Foreign Ministry spokeswoman.
Maria Zakharova posted an image of Vucic sitting across from Donald Trump at his Oval Office, comparing it to an iconic scene from the film "Basic Instinct".
The post's caption mocked that the Serbian President was invited to the White House "under interrogation".
Zakharova later apologised after a furious reaction from Serbian officials, saying her post had been "misinterpreted".
"This president did not say a single bad word against Russia ... I will not allow you to attack proud Serbia. Shame on you!' tweeted Marko Djuric, an official with Vucic's ruling party.
The Serbian President had reportedly defended Belgrade's close ties with Moscow, refusing to impose sanctions on Russia over policies in Ukraine.
Russian Foreign Minister Sergey Lavrov added on Sunday that the two states maintain "sincerely close ties".