EU member states have agreed the terms for negotiating a "whole package" aimed at normalising ties with Cuba, an EU source said Wednesday.
A new accord would "encourage the reform process (in Cuba) and engage in a dialogue based on respect for human rights," the source said.
It would also "serve to promote trade and economic relations," the source said, adding that the European Union was "extremely aware of the human rights aspect".
The agreement will be put before EU foreign ministers next month for approval, said the diplomat, who asked not to be named.
The European Union suspended links with Cuba in 2003 after a crackdown that saw 75 dissidents thrown into jail. They have all since been released.
Dialogue was resumed in 2008, with Cuba agreeing several bilateral agreements with some 15 EU member states.
The 28-member bloc currently bases its policy on Cuba, one of the world's few remaining communist states, on a 1996 document that links relations to improvements in the human rights situation on the Caribbean island.
The EU has appeared increasingly ready to update the 1996 position as Cuba has introduced limited reforms in an effort to revive its moribund economy.
Earlier this month, European Commission head Jose Manuel Barroso said the bloc was studying "the possibility of revising that position" but that all 28 members would have to agree.
"It is important that Cuba respects human rights, that it does not have political prisoners. Freedom of expression and freedom of association are very important," Barroso said.
"Anything positive that can be done in Cuba to open the country to democratic values will certainly be positive."