The move, which constitutes the biggest ever blow to the prestige of UK producers, will also give them the right to sell their products throughout the entire EU for the first time.
Discussions among diplomats in Brussels yesterday put the seal on the 25-year row about the quality of British and Irish chocolate, judged by several continental countries to be inferior.
The agreement is likely to be rubber-stamped by ministers this month but still needs approval from the European Parliament, which could try to unpick it.
Often made with vegetable fat rather than pure cocoa butter, and containing more milk than French or Belgian chocolate, the British version has been blocked from sale in several European countries since the UK joined the Common Market in 1973.
Yesterday's outcome secures the right of the big producers such as Cadbury's to keep selling their product at home as chocolate, while forcing firms to accept that there is a distinction between their products and that of continental rivals.
Bars containing up to 5 per cent vegetable fat will be permitted but have to include a prominent label near the list of ingredients saying in bold, "contains vegetable fats in addition to cocoa butter."
Confectionery with more than 20 per cent milk content will have to be labelled "family milk chocolate" for the export market, although that will not apply to the UK sales.
The plan was expected to be approved by ministers last week in Luxembourg before last-minute technical objections were raised by the European Commission. Those were withdrawn after yesterday's negotiations by deputy ambassadors of the 15 member states.
A British official said: "This agreement is still subject to confirmation by ministers and will need to be approved by the European Parliament, but we welcome this step forward in creating a genuine single market in chocolate."
The deal has been backed by the British chocolate industry because of the potential trade benefits. It fought off a suggestion that milk chocolate should be described as "household milk chocolate", settling for the "family" description instead.
John Newman, director of the Biscuit, Cake, Chocolate and Confectionery Alliance, said: "Given the very strong feelings it is an acceptable solution. We will at least have commercial access and have achieved a true internal market in chocolate."Reuse content