The United States has removed Cuba from its list of state sponsorsof terrorism.
The move eliminates a major obstacle toward restoring diplomatic ties.
The change allows Cuba to conduct banking in the United States, among other activities.
President Barack Obama announced a historic thaw with Cuba in December, but the US trade embargo against the country remains, and may only be ended by Congress.
The removal has been one of Cuba's key demands, as leaders from both countries have repeatedly met to negotiate the details of restoring diplomatic relations, including the opening of embassies in Washington and Havana.
The action comes as signs of difficulty were seen in recent talks between US and Cuban diplomats.
Last week, diplomats met in Washington, but failed to come to an agreement on opening embassies.
The BBC's State Department Correspondent Barbara Plett Usher says the removal will give Cuba greater access to sources of international financing that were previously denied.
"The United States has significant concerns and disagreements with a wide range of Cuba's policies and actions," the State Department said in a statement. But those concerns, it said "fall outside the criteria relevant to the rescission of a State Sponsor of Terrorism designation".
Mr Obama ordered a review of Cuba's presence on the list as part of his major policy shift announced on 17 December.
The department said that Mr Obama notified the US Congress of his intent to remove Cuba from the list on 14 April.
Lawmakers had 45 days to take issue with his decision - a period that lapsed on Friday.
The US government had maintained that Cuba has sheltered members of the Basque separatist group ETA and the Farc guerrilla group in Colombia, according to a government report.
The Caribbean nation has frequently rejected its presence on the list, describing it as unfounded.
The country - which lies 90 miles off the coast of Florida - was on the list since 1982. The current list includes Syria, Iran and Sudan.
Stonegate Bank of Florida has agreed to allow members of the Cuban government to open an account, according to US media reports.