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People gaining it would secure rights on healthcare, education and benefits broadly similar to those enjoyed by EU citizens in the UK now.
But in a move giving Ms May leverage as talks begin, she refused to reveal the exact date after which new arrivals are no longer guaranteed the status - leaving a group of people uncertain of their UK residency.
The extra bargaining power could be deployed as the Prime Minister pushes Brussels to ditch its demand that EU citizens’ rights are guaranteed by the European Court of Justice even after Brexit - something she told leaders would not happen under her plan.
Ms May played her hand on the opening day of the European Council summit, which also saw a string of leaders suggest Britain can come back to the union if it changes its mind on Brexit.
At the same time German Chancellor Angela Merkel, the most powerful European leader, made clear Brexit is only of secondary importance to her, with the unity of the 27 remaining states paramount.
Ms May was invited to update European leaders on her plans for Brexit at the end of a dinner, telling them it is a, “fair and serious offer and one aimed at giving as much certainty as possible as to citizens settled in the UK, building careers and lives.”
Her proposals would see anyone who has already lived in the UK for five years given the new ‘settled status’, securing their position in the country.
Anyone arriving after the triggering of Article 50, but before the notional cut-off date, yet to be set, would also have the chance to stay for five years and gain the status.
But people arriving after the cut-off date but before Brexit day, will be given a “grace period” of up to two years to “regularize” their status in the country, possibly managing to stay for the five years and gain settled status, but potentially not.
Ms May also said there will be a streamlined administrative process to sort through people’s cases, using digital tools to register people in a “light touch” way.
Theresa May in 'Maybot' mode on arrival at the EU Summit
The British offer stands only on the basis that a reciprocal one is made for UK citizens living in EU countries, Ms May’s officials said.
Government insiders in the UK believe an earlier cut-off date will prevent a wave of new immigrants coming before Brexit day, expected to be in March 2019.
But the EU has demanded that the cut-off date be on Brexit day, with the European Parliament already pledging to vote against any Brexit deal that differs.
The vagueness around the UK’s position on the cut off-date and the suggestion that Ms May is willing to set it earlier than the EU wants, indicates she is both willing to engage in some brinkmanship and to budge on the issue.
But her position on the ECJ role in guaranteeing EU citizens’ rights was far clearer.
She told leaders: “The commitment that we make to EU citizens will be enshrined in UK law and will be enforced through our highly respected courts.”
A British official went further and said: “We have been clear on the ECJ that we are taking back control of our own laws.”
It means a potential settlement on the matter of citizens rights could see Ms May agreeing to set the cut-off date on Brexit day, while the EU would back down on its tough position concerning the ECJ.
The offer was set out following a meal of Mediterranean vegetable tart with grilled Chavignol goat's cheese, followed by Monkfish wrapped in lardo di Colonnata with stuffed courgette flower and finished with macerated cherries and almond milk ice cream.
With no chance to debate the plans at council, Ms May will have left the EU leaders with many questions before she publishes her full plans to Parliament on Monday next week.
On Thursday morning European Council President Donald Tusk lamented the UK's pending departure, earlier in the day suggesting like French President Emmanuel Macron before him, that the door to the UK is still open.
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