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EU countries on Tuesday formally approved a new 150-billion-euro loan programme to help rearm in the face of Russia and worries over US reliability, according to the Polish presidency of the bloc.
The SAFE borrowing scheme backed by the EU's central budget was proposed by Brussels in March as the bloc rushes to boost its defences.
Finalised by member states earlier this month, the text received final approval at a meeting of Europe ministers in Brussels, with 26 countries voting for and one abstention, the presidency said.
EU countries had haggled at length over what the money could be spent on and how countries outside the bloc can access the funds.
In the end, the agreement stuck to the original proposal allowing 35 percent of the value of the weapons to come from manufacturers beyond the bloc and Ukraine.
France's Europe minister Benjamin Haddad called SAFE "a major step forward" that asserts "a very clear principle of European preference to support our industries, reduce our dependencies including from the United States, and invest in Europe's strategic autonomy."
"But it is just one step -- and we will need to go further," Haddad told reporters in Brussels.
The borrowing programme is part of a package of measures including loosening budget rules that Brussels says could potentially unlock 800 billion euros of defence spending.
The approval of SAFE came after the EU and the UK agreed a new defence partnership as part of a post-Brexit "reset".
London would still need to strike a separate deal with the EU if it wants to fully open the new scheme to the British defence industry.