The council of the EU gave notice to illegal traders it had agreed to make laws to close a loophole that allows them to flout the system.
Currently it is not against the law to sell timber in the EU that was chopped down illegally in its country of origin.
EU law chiefs said they had "signalled" approval for new legislation that bans timber illegally felled anywhere from entering the EU market.
Environment secretary Caroline Spelman said: "The UK has supported EU measures to rid illegal timber from our market. Getting this agreement is a priority for the coalition.
"We need to make it an offence to bring illegal timber into the EU and cut off the markets where it can be sold. The EU backing this measure is a massive step forward."
Illegal logging led to deforestation, contributed to climate change and harmed wildlife, economies of developing countries and the livelihoods of local people, Caroline Spelman said.
The Due Diligence Regulation would make it illegal for timber not logged in compliance with the law of its country of origin to enter the European market.
Those placing timber on the market will have to show "due diligence" to help achieve this aim. The European Parliament is expected to vote the proposal next month.