EU President Donald Tusk said the bloc would open "exploratory contacts" with London after European leaders endorsed an interim deal on the terms of Britain's divorce, and approved the next stage of discussions.
However, they agreed that while talks will begin in January on a post-Brexit transition period of around two years, actual negotiations on future trade ties would not start until March.
"It is now time for internal EU 27 preparations and exploratory contacts with the UK to get more clarity on their vision," Tusk told reporters at the end of the summit.
"Today is an important step on the road to delivering a smooth and orderly Brexit and forging our deep and special future partnership," May tweeted.
Also Read
But he warned the next stage "would be much harder than the first phase, and the first phase was very hard".
She had earlier warned that "there remain many issues to be solved and we don't have much time".
Britain voted to leave the EU in a referendum in June 2016 and is due to end its four decade membership on March 29, 2019.
After months of difficult talks, May and Juncker agreed a deal on the key divorce issues of Britain's exit bill, the future of the Irish border and expatriate rights.
At a meeting without the British premier on Friday, the other EU leaders formally approved negotiating guidelines saying there had been "sufficient progress" and that the second phase could begin.
Leaders said there had been polite applause for May, who came to the summit hours after a humiliating parliamentary defeat over her Brexit plans.
Hungarian Prime Minister Viktor Orban said May, who has struggled to assert her authority since a disastrous snap election in June, was "a tough leader in the interest of Britain".
Dutch Prime Minister Mark Rutte said she was a "formidable political operator" but that it was "crucial" she sets out Britain's wish list for long-term ties.
Options for a future relationship include following the model of a recent EU-Canada trade deal, or Norway's membership of the European Economic Area.
British officials are hoping for a deal by March on a two -year transition out of the bloc, during which their relationship would largely stay the same.
Questions still linger however over the divorce agreement, after Brexit minister David Davis appeared to suggest it was not legally enforceable and that Britain would only pay its exit bill if it got a trade deal.
"Even a primary school student will realise there is a problem to solve with the Irish border," said Austria's Chancellor Christian Kern.
Disclaimer: No Business Standard Journalist was involved in creation of this content