The parliament of the Yugoslav federation has agreed to consign Yugoslavia to the history books and create a new nation.
The new state will be called Serbia and Montenegro.
The vote in parliament followed recent approval of the constitutional charter by the local parliaments of Serbia and Montenegro. It was seen as the last nail in the coffin of Yugoslavia.
The country was a former kingdom that became a Communist-run, six-republic federation at the end of World War II. It existed unchanged until the early 1990s, when it started breaking up in a series of wars in which more than 200,000 people died.
By 1992, only Serbia and Montenegro remained in Yugoslavia, and there were fears in recent years that these two republics would go to war as well.
The leadership of tiny Montenegro was growing increasingly restive under what it perceived as Serbian domination, but Serbia was reluctant to let the republic go its own way because without it, Serbia has no access to the sea.
But under a deal mediated by the European Union last year, independence was put on hold for at least three years, after which both republics could hold referendums on the issue.
The current agreement envisages a loose union linked solely by a small joint administration running defense and foreign affairs.
Serbia's capital, Belgrade, will remain the nation's capital, but some joint institutions will be based in Podgorica, the capital of Montenegro.
The European Union wants Serbia, with about 10 million people, and Montenegro, with just 650,000 to remain allied for the sake of stability in the Balkans.
Analysts say the formation of the new state is a key condition for the admission of Serbia and Montenegro into the Council of Europe and, later, the European Union.