Russia, meanwhile, fended off for the time being a new, more crippling round of Western sanctions over its intervention in Ukraine, where a fragile cease-fire between government forces and pro-Moscow separatists in the east was set to expire Friday night.
"What a great day!" a beaming Ukrainian President Petro Poroshenko said in Brussels upon the signing of the economic agreement with the European Union. "Maybe the most important day for my country after independence."
Since it became independent in the 1991 Soviet collapse, Ukraine has been involved in a delicate balancing act between Russia and the West. The Kremlin wants to keep Ukraine, the birthplace of Russian statehood and Russian Orthodox Christianity, in its orbit.
In November, under pressure from Moscow, Ukrainian President Viktor Yanuknovych spiked the EU pact, triggering huge protests that drove him from power. Moscow responded by annexing the mainly Russian-speaking Crimean Peninsula in March, and pro-Russian separatists soon rose up in Ukraine's eastern provinces.
While Friday's signing marked a defeat for Russian President Vladimir Putin, who has threatened to cancel trade preferences for Ukraine, the Kremlin made no immediate move to punish its neighbor.
Putin spokesman Dmitry Peskov said Russia will take the necessary measures to protect its markets only when the agreement takes effect. That will take a few months.
Meanwhile, EU leaders decided not to immediately impose new sanctions on Russia for the uprising. But they warned that punitive measures have been drawn up and could be levied immediately.
And they demanded Russia and the rebels take steps to ease the violence, including releasing all captives, retreating from border checkpoints and launching "substantial negotiations" on Poroshenko's peace plan.
The weeklong cease-fire, which both sides have been accused of violating, was set to expire at 10 p.m. local time. Poroshenko said he would decide whether to extend it. Insurgent leader Alexander Borodai said the rebels were ready to do so and would also soon release the European observers they have been holding for weeks.
At the signing ceremony, Poroshenko reminded EU leaders of the bloodshed in his country.
Ukraine "paid the highest possible price to make her European dreams come true," he said, asking the EU to pledge that one day Ukraine can join the 28-nation bloc. Membership "would cost the European Union nothing," he said, "but would mean the world to my country."
In Kiev's Independence Square, the site of last winter's huge protests against Russian domination, balloons the color of the EU's blue flag were released over the crowd as a rock band pounded out the European Union's anthem, Beethoven's "Ode to Joy."
The crowd of several hundred was far smaller than the hundreds of thousands who jammed the square at the height of the protests. Rain, people getting out of town ahead of a long holiday weekend, and the simmering conflict in the east worked to restrain the mood.
Protest veteran Oleg Mityukhin, 48, came wrapped in the Ukrainian flag.
"I think there will be less corruption, there will be better quality goods, and it will be a push forward for the development of Ukraine," he said.
The agreements signed Friday let businesses in Ukraine and two other former Soviet republics, Moldova and Georgia, trade freely in any of the EU's nations without tariffs or restrictions as long as their goods and practices meet EU standards. Likewise, goods and services from the EU will be sold more easily and cheaply in the three countries.
Amanda Paul, a policy analyst at the Brussels-based think tank European Policy Center, said Russia has levers to inflict serious economic pain on Ukraine, Moldova and Georgia through trade restrictions, cuts in energy supplies or the deportation of migrant workers from those countries.
European Commission experts estimate the deal will boost Ukraine's national income by 1.2 billion euros ($1.6 billion) a year.
The deal also demands that Ukraine adopt EU rules on government contracts, competition and copyrights - steps that could reduce corruption and make the country more attractive to investors.
Isachenkov reported from Moscow. AP correspondents David McHugh in Kiev, Geir Moulson in Berlin, Juergen Baetz in Brussels, Laura Mills in Moscow and Balint Szlanko in Donetsk, Ukraine, contributed to this report.