Theresa May told MPs on Wednesday that an agreement struck between Brexit Secretary David Davis and EU chief negotiator Michel Barnier would allow talks on the future trade relationship to be triggered later this week.
European Council president Donald Tusk said he had recommended that EU leaders welcome the transition deal "in practice" as it would "allow to delay all the negative consequences of Brexit by another 21 months".
Under the terms of the joint legal text agreed by Mr Barnier and Mr Davis, the UK will be able to negotiate and ratify trade deals with outside countries following Brexit Day in March 2019, to enter into force after the end of a transition period lasting until the end of 2020.
Mrs May told the Commons that for the first time in 40 years, Britain would be able to "forge our own way by negotiating our own trade agreements".
However, the PM faces warnings that the deal could be scuppered by her own MPs unless she tears up "unacceptable" proposals for fishing.
Some 14 of the PM's backbench parliamentary allies - 13 Conservatives and one DUP MP - have signed a joint letter denouncing the draft deal agreed by the Government earlier this week.