The Association of Southeast Asian Nations (ASEAN) Summit held in Cambodia announced that Timor-Leste "in principle" will be admitted as the 11th member state of the group.
The country will be granted observer status at ASEAN meetings, including summit plenaries.
The bloc made the announcement on Friday, more than a decade after Timor-Leste requested membership.
The statement said that there will be an "objective criteria-based roadmap" for Timor-Leste's full membership. It added, "In principle to admit Timor-Leste to be the 11th member of ASEAN."
The bloc decided to "grant an observer status to Timor Leste and allow its participation in all ASEAN Meetings including at the Summit plenaries," read the statement.
The leaders had discussed this at a plenary session held in the Cambodian capital on Friday. Myanmar's military leaders were not in attendance, as they have been shut out from high-level meetings.
ASEAN leaders said that all member states and external parties shall fully support Timor-Leste to achieve the milestones by providing "capacity building assistance and any other support needed for its full membership in ASEAN".
Timor-Leste is a nation of 1.37 million people and gained independence from Indonesia in 2002 and officially applied for ASEAN membership in 2011.
The roadmap, to be formulated by the ASEAN Co-ordinating Council, will be reported to the 42nd ASEAN Summit for adoption.
Cambodia, which is this year's ASEAN summit chair, was the last country to join ASEAN, in 1999.
The association was formed by five member states in 1967 - Singapore, Malaysia, Indonesia, Thailand and the Philippines. Brunei was added to the grouping in 1984, when it gained independence from the British.
Membership further expanded in the 1990s as the Cold War ended and Vietnam, which normalised relations with the United States in 1995, joined ASEAN in the same year. Myanmar and Laos followed in 1997.
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