"We have waited for this day for a very long time," Kosovan Prime Minister Hashim Thaci told a packed parliament at the start of an emergency session called on Sunday afternoon to, as he said, "take decisions on the future of our nation."
He said the new state would be "proud, independent and free."
Both Thaci and Kosovan President Fatmir Sejdiu pledged that the new state would respect the rights of all ethnic groups. Thaci also said that Kosovo was a unique case, and that it should not set a precedent for other secessionist regions.
The vote for independence was unanimously passed with a show of hands.
There were celebrations across Kosovo following the declaration, as thousands of people poured onto the streets of what is now, notwithstanding opposition from Serbia and Belgrade, among others, the world's newest state.
REACTIONS FROM BELGRADE AND MOSCOW
Both Belgrade and Moscow reacted angrily to the declaration of independence by Kosovo.
Serbian Prime Minister Vojislav Kostunica said that it "violates international order," and that Kosovo was a "false state."
"Kosovo will forever remain a part of Serbia," he said. "We do not recognize the forceful creation of this false state. We must support our countrymen in Kosovo."
"As long as the Serb people exist, Kosovo will be Serbia," he went on. Belgrade has ruled out the use of force to retake Kosovo, however.
Serbia's main ally, Russia, immediately called for emergency UN Security Council consultations on the issue. Moscow is deeply opposed to the unilateral declaration of independence by Kosovo. It has said that it contradicts international law, and sets a dangerous precedent for other secessionist regions.
The UN Security Council meeting called by Russia is due to be held at 6:00 p.m. GMT on Sunday.
The Russian Foreign Ministry said that Kosovo's unilateral declaration of independence could lead to new conflicts in the Balkans.
"The decision of the leaders of Kosovo is fraught [with the danger of] an escalation in tensions and ethnic violence in the province, and new conflicts in the Balkans," the ministry announced on its website.
A Kremlin spokesman called the declaration "illegitimate" on Russia's Vesti TV channel.
Russia, which has consistently maintained that independence for Kosovo contradicts UN Resolution 1244 on territorial integrity, also called on the UN and NATO to annul the declaration of sovereignty.
FEARS OF CLASHES
NATO peacekeeping troops are on alert, ready to deal with any clashes between ethnic Albanians and Serbs in the flashpoint town of Mitrovica, in northern Kosovo.
A short time before the declaration of independence, Kosovo police stopped hundreds of Serbian reservists who had attempted to cross into the then-Serbian province to protest its breakaway from Belgrade.
U.S. President George Bush, currently on a week-long tour of Africa, said in Tanzania before the declaration that, "The United States will continue to work with our allies to the very best we can to make sure there's no violence."
"We are heartened by the fact that the Kosovo government has clearly proclaimed its willingness and its desire to support Serbian rights in Kosovo," he went on.
The EU also called for calm. "We appeal to all parties in Kosovo and in the wider region to remain calm and not to respond to any provocation," said EU spokesman Jens Mester. "The international community will not tolerate violent action in Kosovo."
The European Union has given its final approval for sending a civilian and police mission to Kosovo to replace the current UN mission, diplomatic sources in Brussels said on Saturday.
Russia has hinted that it may now recognize Georgia's breakaway regions of Abkhazia and South Ossetia.
"The declaration of sovereignty by Kosovo and its recognition will undoubtedly be taken into account in [Russia's] relations with Abkhazia and South Ossetia," the Russian Foreign Ministry said in a statement on Friday.
Georgia, however, does not intend to recognize Kosovo's independence, and the issue is not on the agenda, a parliamentary spokesman for the former Soviet republic has said.
He said Georgia was more concerned by Russia's stance on South Ossetia and Abkhazia.
"The issue is not on the agenda. We care about the future of our territories," he said. "We will wait and see what Russia does concerning Abkhazia and South Ossetia."
South Ossetia and Abkhazia declared independence from Georgia following bloody conflicts in the wake of the Soviet Union's 1991 collapse.
Kosovo has been a UN protectorate since the NATO bombing of the former Yugoslavia ended a conflict between Albanian and Serb forces in 1999.