The FTSE 100 Index broke through the 7,000-mark as shares were buoyed by a recovery in the price of oil as well as hopeful signs over the Greek debt crisis.
Commodity stocks also helped the top-flight over the line as metals prices rose, with Anglo American surging five per cent to lead the risers' board.
London's leading share index peaked at a new intraday record of 7024.2 before setting a new all-time closing high of 7022.5, up 60.2 points in the day.
The FTSE had been on the cusp of the landmark since soaring to new highs in the previous session, following on from a Budget-inspired rally earlier in the week.
Investors have also been buoyed in recent days by the prospect of UK and US interest rates remaining lower for longer.
Richard Hunter, head of equities at Hargreaves Lansdown, said: "It is pleasing to see the psychological barrier of 7000 level reached at last. The fact that the FTSE 100 is now some seven per cent ahead in the year to date is a sign of ongoing optimism from investors, despite the wider challenges being faced."
Germany's Dax and France's Cac 40 were also strongly ahead, as was New York's Dow Jones Industrial Average.
On currency markets, the pound bounced back against the US dollar, surging by two cents to just under 1.50 after steep plunge in the previous session though it was slightly lower against the strengthening euro, at just below 1.38.
In London, improvements in commodities prices lifted Anglo American 54.5p to 1100.5p while Glencore added 13.6p to 299.3p and Fresnillo rose 27.5p to 706.5p.
The price of a barrel of Brent crude edged above 55 US dollars during the session helping heavyweight BP climb 10.1p to 451p and rival Royal Dutch Shell add 31p to 2171p.
UK-listed Irish building supplies firm CRH also rose strongly, adding five per cent after France's Lafarge and Switzerland's Holcim said their £5 billion mega merger was back on.
To satisfy regulatory concerns CRH had agreed to buy Lafarge Tarmac in the UK, but a hitch with the larger deal earlier this month had also put the CRH purchase on hold. CRH lifted 89p to 1840p.
TSB was up 7p to 334p after it reached an agreement with Spain's Banco de Sabadell on a £1.7 billion takeover of the British lender.
The deal is expected to see shareholders in the bank receive 340p per share and state-backed Lloyds selling its 50 per cent stake.
For Lloyds Banking Group, which was forced to offload hundreds of branches under the TSB brand after its taxpayer bail-out, the deal means it will offload its stake in the bank ahead of its end-of-year deadline. Its shares rose 1.1p to 80.6p.
The biggest risers in the FTSE 100 Index were Anglo American up 54.5p at 1100.5p, CRH up 89p at 1840p, Glencore up 13.6p at 299.3p and Fresnillo up 27.5p at 706.5p.
The biggest fallers in the FTSE 100 Index were Persimmon down 89p at 1689p, Imperial Tobacco down 50p at 3105p, Kingfisher down 4.4p at 370p and Dixons Carphone down 5p at 427.2p.
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