EU leaders have told the UK they are willing to hold trade talks before Brexit but only if there is "sufficient progress" on the divorce negotiations.
Issuing guidelines on the approach the remaining 27 countries will take to the Brexit negotiations, the European Council offered what EU sources have described as a "carrot" with a two-phase approach.
The EU has said if enough progress is made on the terms of the divorce in the first phase of talks, then the negotiations can move to a second phase where a trade deal can be discussed.
The guidelines state: "The European Council will monitor progress closely and determine when sufficient progress has been achieved to allow negotiations to proceed to the next phase on a future relationship."
The rights of EU citizens living in Britain and UK citizens in Europe will be among the first topics up for discussion under the divorce talks - also up for discussion is the Brexit bill, which has been put at €60bn (£52bn).
The guidelines also make clear the EU wants to see a "transitional" deal after Brexit in 2019 and before any trade deal is agree but on the condition that the UK continues to accept EU rules.
These will include the UK abiding by EU rules, paying budget contributions, remaining under the jurisdiction of the European Court and perhaps even accepting freedom of movement - significant issues for those who voted leave .
The European Union's approach to talks, which will shape its future relationship with the UK, are being laid out by the council president Donald Tusk.
The draft guidelines issued today are expected to be amended and approved at a summit in late April.
On Wednesday, the Prime Minister set out her priorities for Brexit talks in a letter which triggered Article 50, in which she said that divorce talks and free trade talks should take place at the same time.
However, in the immediate aftermath of the Article 50 trigger both German German chancellor Angela Merkel and French president Francois Hollande said now.
:: EU fires back after Theresa May pulls Brexit trigger
Mr Tusk's negotiation guidelines are also expected to endorse the leaders' insistence that Brexit terms - including the so-called "divorce bill" - must be settled before a new trade relationship can be discussed.
EU negotiators have indicated that Britain will need to pay around £50bn to cover its outstanding obligations to the bloc.
In her Article 50 letter, Theresa May agreed that the EU and UK need to come to a "fair settlement".
On Thursday, Mr Tusk issued a thinly veiled warning to the UK not to try and play divide-and-rule with the other 27 member states as talks begin.
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He said: "Brexit has made us, the community of 27, more determined and more united than before. I am fully confident of this."
It comes amid claims Mrs May attempted to "blackmail" the EU by warning that if the UK is forced to leave without an agreement future co-operation on tackling terrorism and crime would be "weakened".
European Parliament chief Brexit negotiator Guy Verhofstadt told Sky News the warning amounted to a "threat" and was unacceptable.
He said: "A big mistake that we could make from both sides is to start with launching threats to each other.
"It doesn't work like that - you cannot use, or abuse, I should say, the security of citizens to have then a good deal on something else."
:: The full text of Britain's Article 50 letter
Earlier, Brexit Secretary David Davis told Sky News the Prime Minister was not using security as "a bargaining chip".
He said: "What she said was that if we don't have a deal, it's not good for either side."