Britain's Prime Minister Keir Starmer said it "marks a new era in our relationship... We are agreeing a new strategic partnership fit for our times."
The defence deal will mean more regular security talks, Britain possibly joining EU military missions and the potential for London to fully tap into a 150-billion-euro ($167-billion) defence fund being set up by the bloc.
The two sides also agreed to lift controls imposed on UK exports to the 27-country bloc, in exchange for Britain extending EU fishing rights in British waters for a further 12 years.
Starmer said there would be "real, tangible benefits" for the UK in "security, irregular migration, energy prices" which would result in "bringing down bills, creating jobs and protecting our borders".
EU chief Ursula von der Leyen said it was "a big day because we are now turning the page and opening a new chapter".
"That is so important in these times, because we see the rise of geopolitical tensions, but we are like-minded. We share values," she added.
EU diplomats said a deal had been reached on resetting ties after late-night talks to resolve differences went down the wire.
Surrender
The UK said the new economic agreement with the European Union eases customs checks on food and plant products to "allow goods to flow freely again".
The pact adds "nearly £9 billion" ($12 billion) to the British economy by 2040, Downing Street said in a statement.
Starmer's Labour government had argued the EU deal painfully negotiated under the UK's previous Conservative government "isn't working for anyone".
But Starmer, who came to power in last July's general elections, ousting the Conservatives, has several red lines he has said he will not cross, ruling out rejoining the customs union.
The Conservatives have already criticised the reset move as a "surrender".
The two sides inked the "Security and Defence Partnership" -- the highlight of Monday's sit-down between Starmer and von der Leyen, European Council President Antonio Costa and chief diplomat Kaja Kallas.
Two other documents were signed on Monday -- a joint statement of European solidarity from the EU-UK leaders' summit and a Common Understanding on topics from trade to fishing and youth mobility.
Under the final agreement, Britain will keep its waters open for European fishermen for 12 years until June 2038, in return for the bloc indefinitely easing red tape on food imports from the UK.
The deal "would result in the vast majority of movements of animals, animal products, plants, and plant products between Great Britain and the European Union being undertaken without the certificates or controls that are currently required", according to the text.
On youth mobility, negotiators said they would "work towards a balanced youth experience scheme on terms to be mutually agreed", leaving the fine print to later.
Starmer, who has vowed to battle rising irregular immigration, is approaching the issue cautiously amid soaring support for Nigel Farage's hard-right anti-immigration and Eurosceptic party Reform UK.
Shadow of Russia, Trump
The talks come as the EU and Britain race to rearm in the face of the threat from Russia and fears that under President Donald Trump the United States will no longer help protect Europe.
But much of the details of the defence partnership will also be filled in later.
Giving the UK and its defence industry unfettered access to the EU programmes, for instance, would require further agreement.
Starmer has also rejected a return to full freedom of movement across EU-UK borders but is open to a limited youth mobility scheme that would allow some British and European 18- to 30-year-olds to study and work in the UK and vice versa.
Olivia O'Sullivan, director of the UK in the World programme at the think-tank Chatham House, told AFP the deal is "the next step in closer cooperation... but not a resolution of many of the outstanding questions".
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