By Oana Lungescu
BBC News, Brussels
Turkey's bid to enter the EU has been controversial
The other two chosen capitals are regional centres in EU countries - Pecs, in south-eastern Hungary and Essen in Germany's industrialised Ruhr Valley.
The nominations, made by a jury of European experts, are expected to be confirmed by EU culture ministers next November.
The significance of the choice is more than cultural.
'Public spirited'
There were gasps, applause and even some tears from the Turkish delegation when Sir Jeremy Isaacs, the chairman of the selection panel, made his announcement.
The reason for the panel's choice, he explained, was not only the well-known fact that Istanbul lies at a geographical cross-roads with Europe and has interacted with European civilisations for centuries.
The city's bid, he said, was well prepared and highly effective.
"Interestingly, the Istanbul application, the bid, did not begin either with the government of Turkey or with the government of the city of Istanbul, but with groups of public-spirited citizens, who took into their own hands the initiatives of leading their city towards this bid," he said.
Ukraine is keen to be regarded as a truly European country
"As a consequence, groups of people within the city own the bid in their own right.
"They told us of the different elements that went to make up their bid, of their dialogue that they intend with Europe on issues which we share and on differences that distinguish us," he added.
By contrast, Kiev only started preparing its bid about a year-and-a-half ago.
In fact, the idea originally came from members of the European Parliament, who had observed the contested presidential elections in December 2004 and the Orange Revolution that followed.
EU flags were waved in Kiev along with those of Ukraine, to show the country was looking westwards.
But the short preparation period took its toll, Sir Jeremy explained.
"They had less to say to us about the actual events of 2010 than other cities might have done. But they put forward to us passionately and urgently their city's desire to be considered as a living part of European culture," he said.
Cultural impact
There is little doubt that the bids from Istanbul and Kiev are part of intense lobbying from Turkey and Ukraine to be recognised as truly European countries which deserve to be part of the EU too.
Turkey is a formal candidate country, which started membership talks last year, while Ukraine is currently treated by the EU as a close and valued neighbour, but no more.
Sir Jeremy denied, however, that the choice of Istanbul was political. The panel concentrated only on cultural criteria and chose the city that had made the most impact, he said.
Western people will see the true Turkey, because there are some prejudices, some disinformation
Dilek Istar Ates,
Istanbul bid supporter
Viktoria Borodina, the spokeswoman for Ukraine's mission to the EU, took it with good grace.
"We are very glad for the Istanbul delegation, they received today a chance, a very good chance," she said.
"We hope that Ukraine will continue on this way. Anyway, Kiev - European capital of culture - and all events in the framework of the European capital of culture 2010 will take place."
Dilek Istar Ates, one of the Istanbul supporters, could barely contain her emotion.
"At first, emotionally, it's really important for us. Spirits will go up... Western people will see the true Turkey, because there are some prejudices, some disinformation. This will disappear with Istanbul, capital of culture 2010," she said.
Boost infrastructure
It may be rather optimistic to think that prejudice about Turkey in western Europe will disappear by 2010.
But the title allows the chosen cities to draw more tourists, improve access to cultural events and boost infrastructure.
Past capitals like Glasgow in Scotland, Lille in France and Salamanca in Spain, took the opportunity to revamp city centres and market themselves as tourist magnets.
However, after 2010, cities outside the bloc can no longer apply.
So this was the last opportunity for Istanbul and Kiev to gain the title European capital of culture, though few dispute that both remain great European cities regardless of the outcome.
, named  for 2010, celebrated with spectacular fireworks displays, light shows, cultural performances, and concerts, which were arranged at seven locations across the city, symbolising the seven hills on which ancient Istanbul was built.

The European Union chose Istanbul, Turkey's and Europe's largest city,  as one of the three European Capitals of Culture for 2010 in 2006, along with  in Hungary, and  in Germany. With its rich heritage and urban life, Istanbul is already recognized as one of the world's great cultural capitals.

Istanbul beat , Ukraine's capital, for the title and became the last European Capital of Culture outside the EU; after 2010, non-EU cities can no longer apply.


The celebrations started with a protocol event taking place at the Haliç Congress Centre, where Ministers from Turkey as well as neighbouring countries participated.

"Istanbul is a European city. With its heart, its culture and civilisation, its people, its past and future, it has always looked towards Europe. Istanbul has shaped European culture and has been shaped by it." said , the country's Prime Minister.