Pope Benedict XVI signed a decree on Thursday recognising the "heroic virtues" of late pope Paul VI, putting him on the first step towards beatification and eventual sainthood.
Italian-born Giovanni Battista Montini, who was elected pope in 1963 and reigned until 1978, oversaw a complex series of reforms in the Roman Catholic Church following the Vatican II Council.
The Vatican said the pope signed the decree after meeting with the prefect for the Congregation for the Causes of Saints, Cardinal Angelo Amato.
Vatican investigators will now try to identify a miracle that can be attributed to Paul VI in order for him to be beatified. A second confirmed miracle is required for canonisation.
Paul VI had a particularly active pontificate and was one of the first popes to engage in extensive international travel.
It was a turbulent time in the Church and the pope had to handle the departure of tens of thousands of priests and nuns who wanted to marry, as well as face criticism from the 1968 generation.
He was also heavily criticised for the encyclical "Humanae Vitae" in 1968 in which he forbade the use of contraception even by married couples.