The integration of the region's youngest and poorest nation — with just 1.4 million people — is being hailed as a symbolic step for regional inclusivity.
After the flag of East Timor, also known as Timor-Leste, was added to the other 10 on the stage at a formal ceremony in Kuala Lumpur on Sunday, Prime Minister Xanana Gusmao told the other leaders that "today, history is made".
"For the people of Timor-Leste this is not only a dream realised but a powerful affirmation of our journey," he said.
East Timor was a Portuguese colony for over four centuries before Indonesia's 1975 invasion.
ASEAN membership gives East Timor access to the bloc's free trade deals, investment opportunities and a broader regional market — vital for diversifying an economy long reliant on oil and gas.
It struggles with high levels of unemployment and malnutrition, and 42 per cent of the population lives below the national poverty line.
Nearly two-thirds of the country's citizens are under 30 years old, making youth job creation a high priority.
Its major source of government revenues comes from the oil and gas industry but with resources quickly becoming depleted it is looking to diversify.
"For us this new beginning brings immense opportunity in trade, investment, education and the digital economy - we are ready to learn, innovate and uphold good government," Gusmao said.
"This is not the end of a journey, this is a beginning of an inspiring new chapter. "
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