Washington said the landmark deal, which still needs U.S. congressional approval, will place India's nuclear program under closer scrutiny. But detractors warned it could set a dangerous precedent in efforts to rid the world of weapons of mass destruction.
"By establishing a 'good guys' and 'bad guys' set of rules, the decision will make it far harder to curb the South Asian nuclear and missile arms race," said Daryl Kimball, who heads the Washington-based Arms Control Association. Kimball said the deal could undermine efforts to contain the Iranians and North Koreans.
Saturday's approval by the 45-nation Nuclear Suppliers Group dealt "a profound setback to the nuclear nonproliferation and disarmament system that will produce dangerous ripple effects for years to come," he said.
The group, which governs the legal world trade in nuclear components and know-how, signed off on the deal after three days of contentious talks in Vienna and some concessions to countries insistent on holding India to its promises not to touch off a new nuclear arms race.
The approval represented a major foreign policy victory for U.S. President George W. Bush, who had made the deal a centerpiece of a major 2005 overture to India.
U.S. Secretary of State Condoleezza Rice, on a trip to North Africa, called the deal "landmark" and said final congressional approval would be "a huge step for the U.S.-India relationship."
The trade waiver paves the way for a U.S. reversal of more than three decades of policy. India has been subject to a nuclear trade ban since it first tested an atomic weapon in 1974. The country conducted its most recent test blast in 1998.
India hailed the agreement as "a forward-looking and momentous decision."
"It marks the end of India's decades-long isolation from the nuclear mainstream," Indian Prime Minister Manmohan Singh said in a statement. "The opening of full civil nuclear cooperation between India and the international community will be good for India and for the world."
Officials said Bush and Singh spoke by telephone Saturday and congratulated each other on the waiver, which removes a key obstacle to billions of dollars in potential trade in peaceful nuclear material and technology between the two nations.
The International Atomic Energy Agency signed off on the deal last month. Now, the Bush administration will have to scramble to get approval from Congress in the few weeks remaining before lawmakers adjourn for the rest of the year to devote time to their re-election campaigns.
"I certainly hope we can get it through," Rice said.
Initially, more than a dozen nations including China and Japan sought to block approval by the nuclear group, which operates by consensus.
But in negotiations that began Thursday, that bloc dwindled to three holdouts - Austria, Ireland and New Zealand - who expressed grave misgivings about bending the rules to accommodate U.S. sales to India.
Austria said it lifted its objections after India pledged on Friday to support the global nonproliferation effort and not share sensitive nuclear technology with other countries - promises the Austrians called "decisive."
India also had said it was ready to sign agreements with the IAEA that will broaden and strengthen the U.N. nuclear watchdog agency's ability to inspect Indian atomic facilities.
John Rood, acting U.S. undersecretary of state for arms control issues, told reporters in Vienna that the deal would help meet India's growing energy needs while helping the developing country, a major polluter, cut back on harmful emissions contributing to global warming.
British Foreign Secretary David Miliband agreed, saying the deal has the potential "to make a significant contribution to energy and climate security" in India and worldwide.
"This is a historic achievement that strengthens global nonproliferation principals while assisting India to meet its energy requirements in an environmentally friendly manner," said Gordon Johndroe, a spokesman for the National Security Council at the White House.
Washington has said it would immediately suspend trade with India if the country resumes nuclear testing.