The announcement was greeted by wild celebrations by Telangana Rashtra Samithi supporters.
"The UPA unanimously decided in favour of Telangana," RLD leader and Union minister Ajit Singh told reporters after a meeting of the constituents of the ruling coalition at the residence of Prime Minister Manmohan Singh.
NCP chief Sharad Pawar said there was a detailed discussion on the issue, and the UPA constituents were "absolutely unanimous" in endorsing the creation of Telangana.
He said if the Congress and BJP come together, there will be no problem in passing the Telangana statehood bill in Parliament.
Besides Singh and Pawar, National Conference leader Farooq Abdullah, Home Minister Sushilkumar Shinde, Finance Minister P Chidambaram and Andhra Pradesh Chief Minister N Kiran Kumar Reddy attended the meet chaired by Congress President Sonia Gandhi.
Union minister and former AICC in charge of Andhra Pradesh Ghulam Nabi Azad, present AICC in charge of Andhra Pradesh Digvijay Singh and political secretary to the Congress president Ahmed Patel were also present in the meeting which lasted nearly one hour.
The top level endorsement however, will not be able to paper over the innumerable problems that the new state will face as the process is kickstarted from sharing rivers to Andhra Pradesh losing some of the top corporates to the new state.
Violence too is feared as the govt has moved additional forces to prevent any untoward incidents.
Here are the highlights of the developments:
6.47 pm: Reports say that celebration have begun at the Telangana Rashtra Samithi (TRS) office in Hyderabad after the proposal for separate statehood getting clearance from the Congress Working Committee and the UPA coordination committee.
6.35 pm: The Congress Working Committee has endorsed separate statehood for Telangana. This came after the UPA coordination committee gave its go-ahead to the creation of Telangana.
5.40 pm: The meeting of the Congress Working Committee (CWC) meeting, which is slated to take the final call on the Telangana statehood issue, has begun. Congress president Sonia Gandhi, Prime Minister Manmohan Singh, Home Minister Sushilkumar Shinde, Finance Minister P Chidambaram, party general secretary Digvijaya Singh and Andhra Pradesh in-charge Ghulam Nabi Azad are attending the meeting.
5.10 pm: Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi meet Andhra Pradesh Chief Minister N Kiran Kumar Reddy over Telangana statehood.
5.05 pm: The UPA coordination committee has unanimously endorsed the proposal for creation of a separate state of Telangana.
4.55 pm: The crucial meet of the UPA coordination committee on the issue of statehood for Telangana has ended. A final decision on the issue of Andhra Pradesh bifurcation is expected soon.
4.32 pm: Andhra Pradesh Chief Minister N Kiran Kumar Reddy reaches the residence of Prime Minister Manmohan Singh. He is expected to meet the Prime Minister and UPA chairperson Sonia Gandhi over the Telangana statehood.
4.29 pm: Congress general secretary Digvijaya Singh asks mediapersons to wait for some time when asked about the possible decision on Telangana statehood.
4.20 pm: Andhra Pradesh Chief Minister Kiran Kumar Reddy has been asked by the Congress leadership to not resign in protest against the decision to create Telangana.
4.10 pm: The United Progressive Alliance (UPA has begun its meeting at the residence of Prime Minister Manmohan Singh to take a final decision on the issue of separate statehood for Telangana.
Before the crucial meeting of the UPA leadership, Congress president Sonia Gandhi on Tuesday met Prime Minister Manmohan Singh over the Telangana issue. The meeting was held even as both pro-Telangana and anti-Telangana leaders continued with their pressure tactics.
While the Congress, along with YSR Congress, have been neutral on the issue throughout the movement, the All India Majlis-e-Ittehadul Muslimeen and the CPI(M) have been opposed to a separate state of Telangana.
However, several parties, including Bharatiya Janata Party (BJP), Telangana Rashtra Samithi (TRS), CPI and Telugu Desam Party (TDP), have supported the idea of a separate statehood for Telangana.
With inputs by PTI