Under the agreement, the EU will grant Ukraine most-favored nation status, removing quotas on Ukrainian imports. And Ukraine will make it easier for EU companies to import or invest.
EU trade chief Sir Leon Brittan said the agreement opens up "a new era in relations."
The deal will offer Kiev regular political consultations with the EU. Union officials said they hoped the agreement will boost Ukrainian democrats in Sunday's parliamentary elections.
The accord is part of an EU drive to build closer links with Eastern Europe that could lead to some nations joining the EU at the end of decade.
The EU executive commission held a special meeting Wednesday to discuss moves to bring in new members from the East. "We are in a pre-accession mode," Brittan told a news conference.
Ukraine is not leading the pack of ex-Communist nations knocking at the EU door. The front-runners are Hungary, the Czech Republic and Poland.
The latter, along with Bulgaria, Romania and Slovakia have agreements with the EU that offer the prospect of membership.
The deal with the Ukraine does not, but provides for an eventual free-trade zone with the EU.
Yet Ukraine Foreign Minister Anatoly Zlenko said he hoped the agreement may one day lead to membership, saying, "This is our dream, our plan, our strategy."
The EU will review Ukraine's progress in market reforms in 1998 before deciding of further measures to open trade.
Zlenko said the current agreement should boost reform in his nation, which has slid toward economic chaos since it broke away from the Soviet Union in 1991.
It will allow EU companies to do business in Ukraine using hard currency, exempting them from requirements on the use of local currency.
Hans van den Broek, the EU's top foreign affairs official, said the agreement underlined the union's support of Ukraine's territorial integrity that has been put into question by separatists in the Crimea and other regions who want closer links to Russia.
The EU has been negotiating a similar accord with Russia, but has failed to reach agreement on trade details.
Separately, the EU announced Wednesday it will send 1.3 million European Currency Units ($1.5 million) to Ukraine and neighboring Belarus to help treat children stricken with cancer as a result of the 1986 Chernobyl nuclear power plant explosion.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Remind me later.