The treaty was signed at Lisbon's historic Jeronimos monastery
The treaty creates an EU president and a more powerful foreign policy chief.
The document, signed at a ceremony at the city's historic Jeronimos Monastery, also scraps veto powers in many policy areas.
It is a replacement for the EU constitution, which was abandoned following French and Dutch opposition.
EU leaders insist that the two texts are in no way equivalent.
But the Lisbon treaty incorporates some of the draft constitution's key reforms, and several governments face domestic pressure over the document.
KEY LISBON TREATY REFORMS Creates new European Council president New foreign policy supremo to increase EU profile Commissioners reduced from 27 to 18 Removes national vetoes in around 50 policy areas Voting weights between member states redistributed No reference to EU symbols such as the flag and anthem Treaty faces referendum in Ireland and must be ratified by all other EU parliaments
Q&A;: Lisbon Treaty Send us your comments Mark Mardell's Euroblog
"From this old continent, a new Europe is born," he said.
Portuguese Prime Minister Jose Socrates, whose country holds the rotating EU presidency, said the treaty would create a more modern, efficient and democratic union.
"The world needs a stronger Europe," he said.
The leaders signed the treaty, translated into the EU's 23 official languages, using specially engraved silver fountain pens as a choir sang Beethoven's Ode to Joy.
UK signing
UK Prime Minister Gordon Brown signed the treaty later in the day after missing the ceremony, citing a prior engagement in the British parliament.
Mr Brown signed the treaty hours after fellow EU leaders
The UK's opposition Conservatives accused Mr Brown of "not having the guts" to sign the treaty, which is politically controversial in Britain, in public.
Having started this year with a celebration of its 50th birthday, the EU hopes the signing of the Lisbon treaty will end the serious mid-life crisis brought about by the death of the constitution, the BBC's Oana Lungescu reports.
There will be a lot of relief, said a senior European diplomat, but also some apprehension about what happens next.
Ireland is the only country planning to hold a referendum, but most voters there seem either undecided or indifferent.
Parliaments in Britain, the Netherlands and Denmark are also expected to give a turbulent reception to the 250-page text.
The treaty is a slimmed-down version of the European constitution, with a more modest name and without any reference to EU symbols such as the flag and anthem.
It is meant to ease decision-making, by scrapping national vetoes in some 50 policy areas, including sensitive ones such as police and judicial co-operation.
There will also be a foreign policy chief, controlling a big budget and thousands of diplomats and officials, and a permanent EU president appointed for up to five years.
But some already fear that instead of giving Europe a strong single voice in the world, the new posts will only generate more rivalry, our correspondent adds.
El logotipo de la ceremonia para firmar el Tratado de Lisboa
Líderes de la Unión Europea
Hoy, en una cumbre en Lisboa, los líderes de las naciones de la Unión Europea firmaron el Tratado de reforma institucional de la Unión Europea, también conocido como el Tratado de Lisboa, el cual reemplaza la Constitución europea.

"De este continente viejo, nace una nueva Europa", dijo el presidente de la Comisión Europea, José Manuel Durão Barroso. "Por primera vez, los países que una vez eran divididos por una cortina totalitaria ahora están unidos a favor de un tratado común que ellos mismos negociaron", continuó.

Nicolas Sarkozy, el presidente de Francia, le dijo a los reporteros: "Europa estaba bloqueada, sin saber cómo seguir hacia adelante y encontramos la solución en este tratado".

David Miliband, el Secretario de Estado de Asuntos Exteriores del Reino Unido, firmó el tratado en representación del primer ministro británico Gordon Brown, quien no pudo atender a la cumbre, citando "previas obligaciones". Dijo: "Este es un día para que Europa mire hacia el futuro".

Brown firmó el documento luego de presentarse a la Cámara de los Comunes en la mañana. Sus críticos dicen que él "no tiene la babilla" para firmarlo y está tratando de escapar de la responsabilidad política que conlleva tener su nombre en el documento.

En la ceremonia, el primer ministro portugués José Sócrates dijo: "Este fue el proyecto europeo en el que muchas generaciones soñaron y que otros lograron hacer antes que nosotros con una visión del futuro".

Ahora, cada país tendrá que retificar el tratado. La mayoría de los países no sostendrán un plebiscito, pero otros están comprometidos a hacerlo, mientras que algunos todavía no han decidido que hacer.