EU ministers meeting in Brussels said the move followed Burma’s “remarkable programme of political reform”.
A statement said further reforms would lead to a further easing of sanctions.
Burma is due to hold by-elections in April which will be contested for the first time by the opposition party led by Aung San Suu Kyi.
Reforms in Burma have been gathering pace in recent months. In mid-January, the government released a series of high-profile political dissidents from prison in an amnesty.
Those freed include veterans of the 1988 student protest movement, monks involved in the 2007 demonstrations and ethnic-minority activists.
“The Council welcomes the remarkable programme of political reform undertaken by the government and parliament,” a statement said.
It added that the reform process had already led to improved relations with the EU and if such reforms continued, then restrictions could further be eased by the end of April.
“These changes are opening up important new prospects for developing the relationship between the European Union and Burma/Myanmar,” the statement said.
The US has also begun the process of thawing diplomatic relations saying that it will start the process of exchanging ambassadors with Burma.
tical incentives.