Serbia spent much of the 1990s ostracized and isolated from the E.U. after Serbian autocrat Slobodan Milosevic started wars in Croatia, Bosnia and Kosovo. In 1999, NATO bombed Serbia to stop the war in Kosovo, forcing Serbia to relinquish control there.
Today, the E.U. is setting the normalization of relations with Kosovo as the main condition for continuing Serbia's membership negotiations with the bloc. But Kosovo's Serb-populated north has remained a flashpoint of the troubles in the Balkans because hardline Serbs there do not acknowledge the authority of Kosovo's central government.
"We believe the time has come to reach a historic compromise," Dacic said after Friday's meeting. "We are ready for talks, even about the final status of Kosovo."
But he also said the talks should not "result in a one-sided recognition of Kosovo's independence."
"We are ready to talk about the position of the Serbian people [in Kosovo], protection of church heritage, war crimes, organ trafficking, the missing, Serb property and the return of refugees to Kosovo," Dacic said.
A statement from Thaci's office said the meeting will clear the path for the two countries to eventually join the E.U., and "serve peace and stability in the region."
Kosovo authorities welcomed the meeting.
"It is very good that [the] very first high-level meeting between the prime minister of the republic of Kosovo and the republic of Serbia was held on equal basis," Arber Vllahiu, the spokesman for Kosovo President Atifete Jahjaga said.
Ashton said she firmly believes the dialogue is in the interest of both sides.
Dacic said the next meeting between the two prime ministers is scheduled in November.