Correspondents say the potential for trouble between Kosovo's Serbs and ethnic Albanians is enormous. Serbia's Prime Minister Vojislav Kostunica blamed the US which he said was "ready to violate the international order for its own military interests. Today, this policy of force thinks that it has triumphed by establishing a false state," Mr Kostunica said. "Kosovo is Serbia," Mr Kostunica said, repeating a well-known nationalist Serb saying.
The declaration was approved with a show of hands. No-one opposed it. "We have waited for this day for a very long time," Mr Thaci told parliament before reading the text, paying tribute to those who had died on the road to independence.
"The independence of Kosovo marks the end of the dissolution of the former Yugoslavia," the prime minister said - Kosovo was a unique case that should not set a precedent. He said it would be built in accordance with the UN plan drawn by former Finnish President, Martti Ahtisaari - at the end of negotiations which did not produce a deal.
The BBC's Nick Thorpe in the flashpoint town of Mitrovica says local and UN police, as well as the Nato troops, are maintaining a high profile to reassure all the citizens of Kosovo that they have nothing to fear. The declaration approved by Kosovo's parliament contains limitations on Kosovan independence as outlined in Mr Ahtisaari's plan. Kosovo, or part of it, cannot join any other country. It will be supervised by an international presence. Its armed forces will be limited and it will make strong provisions for Serb minority protection.
Recognition by a number of EU states, including the UK and other major countries, will come on Monday after a meeting of EU foreign ministers in Brussels, says the BBC's Paul Reynolds. The US is also expected to announce its recognition on Monday. Three EU states - Cyprus, Romania and Slovakia - have told other EU governments that they will not recognise Kosovo, says our correspondent.
Pro-U.S. sentiment is high in both Albania and Kosovo because of American support both in the 1990s against Serbian aggression and war crimes and today for Kosovar independence. The vast majority of Albanians are at Muslims, though many are secular and non-practicing after decades of imposed socialist atheism. Only 10% of Kosovars are Serbs. The Serbian military and its paramilitary allies attempted to brutally suppress an uprising against its iron fist policies during the 1990s, during the reign of the murderous nationalist president and war criminal, Slobodan Milošević, who unfortunately died before he could be convicted.
Russia's foreign ministry has indicated that Western recognition of an independent Kosovo could have implications for the Georgian breakaway provinces of Abkhazia and South Ossetia.
The UN has administered Kosovo since a Nato bombing campaign in 1999 drove out Serb forces.
Comment: Russia has said that allowing Kosovo to become independent would be illegal and immoral. As if Russian President Vladimir Putin, who launched the second Chechen War in 1996, knows anything about morality.