The United States and Cuba have made a historic breakthrough in their Cold War stand-off, moving to revive diplomatic ties and launch measures to ease a five-decade US trade embargo.
In the wake of a prisoner exchange, President Barack Obama said the United States was ready to review trade ties and to re-open its embassy in communist Cuba that has been closed since 1961.
Cuba's President Raul Castro, in a simultaneous address in Havana, confirmed that the former enemies had "agreed to re-establish diplomatic ties" after more than half a century.
Castro cautioned that the issue of the embargo - which he called a "blockade"- remained to be resolved.
In Washington, Obama admitted the US embargo had failed and said he would approach the US Congress to discuss lifting it alongside the advances in diplomatic and travel links.
"We are all Americans," Obama declared in Spanish, in a set-piece White House address marking a historic attempt to reassert US leadership in the Western hemisphere.
Obama hailed the support he said that Pope Francis, the first Latin American pontiff, and the Catholic Church had provided in brokering better relations between the longtime enemies.
The breakthrough came after Havana released jailed US contractor Alan Gross (right) and a Cuban who spied for Washington and had been held for 20 years - the most important US agents in Cuba.
The United States in turn released three Cuban spies, and Obama said he had instructed the US State Department to re-examine its designation of Cuba as a state sponsor of terrorism.
"We will end an outdated approach that for decades has failed to advance our interests and instead we will begin to normalize relations between our two countries," Obama said.
"Through these changes, we intend to create more opportunities for the American and Cuban people and begin a new chapter among the nations of the Americas."
Yesterday's policy shift will mean a relaxation in some aspects of commerce and transportation between the United States and Cuba, but it does not mean an end to the long-standing trade embargo, which needs congressional approval that Obama may face a struggle getting.
And while travel restrictions that currently make it hard for most Americans to visit will be eased, the door will not yet be open for broad US tourism on the Caribbean island.
Cuba and the United States have been ideological foes since soon after the 1959 revolution that brought Raul Castro's older brother, Fidel Castro, to power.
They have not had diplomatic relations since 1961 and the United States has maintained its trade embargo on the island, 90 miles (140 km) south of Florida, for more than 50 years. Obama said he would ask Congress to lift the embargo but will likely face resistance on this.
News of the changes rippled fast through the 1.5 million-strong Cuban American community in the United States, hailed by some who are keen to see closer ties with the island and condemned by others who have opposed any warming while either of the Castro brothers is in power.
"It's amazing," said Hugo Cancio, who arrived in Miami in the 1980 Mariel boatlift and runs a magazine with offices in Miami and Havana. "This is a new beginning, a dream come true for the 11.2 million Cubans in Cuba, and I think it will provoke a change of mentality here too in this community."
Flashpoints in US-Cuba hostilities included the Cuban missile crisis of October 1962 that brought the world to the brink of nuclear war. Washington's policy has survived the demise of Soviet communism and the end of the Cold War as the United States pushes for democratic reform in Cuba.
Fidel Castro retired in 2008, handing power to his brother, who has carried out some economic reforms but maintained a one-party political system.
The three Cuban intelligence agents, jailed since 1998, are Gerardo Hernandez (49), Antonio Guerrero (56) and Ramon LabaA±ino (51). Two others had been released before on completing sentences - Rene Gonzalez (58), and Fernando Gonzalez (51). The three arrived in Cuba yesterday, Castro said.