After half a century of Cold War acrimony, the United States and Cuba moved on to restore diplomatic relations in a historic shift that could revitalise the flow of money and people across the narrow waters that separate the two nations.
Barack Obama's dramatic announcement in Washington - seconded by Cuban president Raul Castro in Havana - was accompanied by a quiet exchange of imprisoned spies and the celebratory release of American Alan Gross, a government contract worker who had been held in Cuba for five years.
The shift in US-Cuba policy was the culmination of 18 months of secret talks between the long-time foes that included a series of meetings in Canada and the personal involvement of Pope Francis at the Vatican.
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It also marked an extraordinary undertaking by Mr Obama without Congress' authorisation as he charts the waning years of his presidency.
"These 50 years have shown that isolation has not worked," he declared at the White House. "It's time for a new approach."
President Obama spoke as Mr Castro was addressing his nation, where church bells rang and teachers paused lessons to mark the news.
Mr Castro said that while the US and Cuba remained at odds on many matters, "we should learn the art of living together in a civilised manner in spite of our differences".
Mr Obama's sweeping plans for remaking US relations with Cuba include expanding economic ties, opening an embassy in Havana and sending top US officials including secretary of state John Kerry to visit and review Cuba's designation as a state sponsor of terrorism.
The US is also easing restrictions on travel to Cuba, including family visits, official government business and educational activities. But tourist travel remains banned.
The two leaders spoke by telephone on Tuesday for nearly an hour, the first presidential-level call between their nations' leaders since the 1959 Cuban revolution and the approval of a US economic embargo on the communist island just 90 miles off coast of Florida.
They are also expected to meet at a regional summit in Panama next spring.
Mr Obama did not rule out travelling to Cuba before his presidency ends, telling ABC News he did not have any current plans, but "let's see how things evolve".
But despite Mr Obama's declaration, the Cuba embargo was passed by Congress and only politicians can revoke it. That appears unlikely to happen soon given the largely negative response to the president's actions from Republicans who will take full control of Capitol Hill in January.
"Relations with the Castro regime should not be revisited, let alone normalised, until the Cuban people enjoy freedom - and not one second sooner," said House of Representatives speaker John Boehner. "There is no 'new course' here, only another in a long line of mindless concessions to a dictatorship that brutalises its people and schemes with our enemies."
But the response from around the world was far more welcoming, particularly in Latin America, where US policy towards Cuba has been despised.
Venezuelan president Nicolas Maduro called Mr Obama's action "a gesture that was courageous and historically necessary" and the Vatican said Pope Francis "welcomed the historic decision taken by the governments of the United States of America and Cuba to establish diplomatic relations, with the aim of overcoming, in the interest of the citizens of both countries, the difficulties which have marked their recent history".
In Cuba, a sense of euphoria spread through Havana as people gathered around televisions to watch the Obama and Castro announcements.
"For the Cuban people, I think this is like a shot of oxygen, a wish come true, because with this, we have overcome our differences," said Carlos Gonzalez, a 32-year-old information technology specialist.
Half a century ago, the US recognised Fidel Castro's new government soon after his rebels took power from dictator Fulgencio Batista. But before long things began to sour as Cuba deepened its relationship with the Soviet Union.
In 1961 the US broke diplomatic relations, and then came the failed US-sponsored Bay of Pigs invasion meant to topple Mr Castro. A year later a US blockade forced removal of Soviet nuclear missiles from Cuba in a stand-off that brought the world to the brink of nuclear war.
While Mr Obama has long spoken of his desire to open ties with Cuba, the 2009 imprisonment of Mr Gross, an American government sub-contractor, became a major obstacle. Mr Gross was detained while working to set up internet access for the US Agency for International Development, which does work promoting democracy in the communist country.
Cuba considers the agency's programmes illegal attempts by the US to undermine its government and Mr Gross was tried and sentenced to 15 years in prison.
Last spring, Mr Obama secretly authorised two of his senior advisers to hold exploratory conversations with Cuba about securing Mr Gross' release. Over a series of nine clandestine meetings in Canada and the Vatican, the talks expanded to include broader discussions of normalising relations.
Mr Gross boarded a US government plane and flew out of Cuba yesterday, accompanied by his wife and three American politicians. "This is game changing," he declared later in Washington.
The two nations also released spies that they were holding.
The Castro government released a Cuban who had spent nearly 20 years in prison after working for the United States and accessing closely-held intelligence information at the highest levels of the Cuban government.
US officials said the spy was responsible for some of the most important counter-intelligence prosecutions that the United States has pursed in recent decades, including convicted Cuban spies Ana Belen Montes, Walter Kendall Myers and Gwendolyn Myers and a group known as the Cuban Five.
In exchange for the spy's release, the US freed the three remaining members of the Cuban Five who were jailed in Florida. The men, hailed as heroes in Cuba, were part of the "Wasp Network" sent by Fidel Castro to spy in South Florida.
Two of the five were previously released after finishing their sentences.
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