The European Parliament has voted down a bid by MEPs from Poland, Finland, the Baltic states, Sweden and Denmark to tighten the legal definition of vodka.
The vote exposed a cultural divide in the EU
The so-called "vodka belt" countries wanted to restrict the term to spirits made only from potatoes or grain.
But a majority of MEPs voted in favour of a looser definition.
Vodka made from anything other than potatoes or grain will have to say so on the label - but no minimum size for the declaration will be stipulated.
MEPs agreed on a looser definition taking in sugar beet, grapes and even citrus fruit, which are used as ingredients by producers in countries such as Britain, France and Germany. They account for nearly a third of EU vodka production.
The new definition is still tighter than the definition in use in the EU up to now.
The decision means that Britain will retain its position as the world's second-largest vodka maker, behind Russia.
The drive to tighten the definition was spearheaded by the national governments of Nordic and Baltic countries.
Speaking before Tuesday's vote, Finnish Socialist MEP Lasse Lehtinen said "this is a battle of the vodka belt against the wine belt, and in between lies the beer belt, which will get to decide".
The European Vodka Alliance (EVA), which has been lobbying against the stricter definition, welcomed the vote.
"We hope now that EU governments will endorse the European Parliament vote and that this issue can be resolved once and for all," said EVA spokesman Chris Scott-Wilson.
The new spirit labelling rules also state that whisky cannot contain flavourings or sweeteners - a move welcomed by distillers of traditional "Scotch Whisky".
Labour MEP Linda McAvan said the new rules would protect regional product labelling.
"This deal is vital for the Scottish Whisky industry to protect Scottish brands and distilleries worldwide against cheap imitations from overseas," she said.
The leader of the British Conservative MEPs, Timothy Kirkhope, also welcomed the vote, saying "people are free today to drink the vodka they want - the British vodka drinker is saved from protectionists in Poland and Finland".