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A world where music lovers can listen to free music over the internet - legally - came a significant step closer today when Last.fm, the social music website, announced that it had record industry's approval to start an unprecedented new streaming service.

As part of the new service, any visitor to Last.fm's site will be able to stream tracks from any of the major record labels in their entirety, without paying, as and when they choose. After three streams - which allow someone to listen to a song, but not to download it onto a computer or music player - they can elect to buy the song from a retail site, such as iTunes.

The deal, which has been hammered out with all four major labels, will give Last.fm users access to millions of tracks, and mean that Last.fm can offer a far more comprehensive service than previously, when users had no control over when they heard songs that they wanted to stream.

A Last.fm user will now, for instance, be able to click on the new Amy Winehouse album and listen to the whole thing in full, or hear tracks individually. In the past, songs had to be added to a playlist, which would play them at random.

People using the site have to be sitting at their computer, but a spokesman for Last.fm said that he hoped a similar service would be available on mobile phones before too long.

"We're trying to make all music accessible without people having to log in or pay anything for it," Martin Stiksel, Last.fm's founder, said. He added that Last.fm's model - which is supported by advertising - was better for artists because it enabled an artist or record label to get paid each time a song was streamed, as opposed to just once, when a person bought a CD.

"Everyone ackowledges that the business of selling plastic discs is not really working. What we're trying to offer is music that you can listen to it anywhere, any time, and that you don't need to have sitting on your shelf. All you need is connectivity."

The new service, which goes live in the US, UK and Germany, represents a significant coup for Last.fm, which is one of a number of sites that have tried to develop free, advertising-supported music offerings.

Spiralfrog, a US-based 'free download' service which forces people to watch ads while a song downloads, has so far only attracted the support of Universal. We7, the start-up backed by Peter Gabriel, which plays a short ad at the start of a music track for up to eight times after it is downloaded, likewise, only has the support of independent labels.

In January, the service that is most like Last.fm, Pandora, which creates what is effectively an 'personalised radio station' for users based on their music tastes, was closed to users outside the US earlier this month because of a dispute with rights holders over royalties.

A spokesman for the IFPI, the record industry body, said the new service and others like it did not mean that CD sales were on the way out, but rather reflected an increasing diversification in the industry. "You're going to see more and more licensing deals like this. These days digital music is not just about downloads. It's streaming and subscriptions as well," he said.

Last.fm, which has 313,000 users in the UK and 1.5 million in Europe, according to Nielsen Online, allows people to share their tastes with others on the site using a process it calls 'scrobbling'.

A person has to download software from Last.fm, and once they have, every track they play on iTunes, for example, is recognised by the site. Software then makes recommendations about other music they might like and puts them in touch with other users who have similar taste.

Last.fm was bought for $280 million by CBS, the US television network, last year.

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