Fidel Castro has not been seen in public since his operation in July

The ailing communist leader, who is 81 and has not been seen in public since surgery in July 2006, said he would not accept a new term as president.

Mr Castro's brother Raul, the 76-year-old acting leader, is strongly tipped to replace him.

The US state department has said its embargo on Cuba remains in place.

This should be a period of democratic transition for the people of Cuba US President George W Bush Reaction in quotesCold War to thaw?Send us your comments

It would probably not be lifted "any time soon", one senior official said.

The European Union said it hoped to revive ties with Cuba while China described Mr Castro as an old friend and said it would maintain co-operation with Havana.

Beijing has taken over as one of Havana's key economic partners, the BBC's Nick Miles reports.

Moscow used to fulfil that role but it was noticeably silent on the end of the Fidel era, he adds.

No demonstrations calling for change were reported on the streets of Havana - in contrast to celebrations by anti-Castro exiles in Miami, Florida.

'Blessings of liberty'

Speaking on a tour of Africa, Mr Bush said he regarded Mr Castro's departure as "a period of transition, and it should be the beginning of the democratic transition in Cuba".

The US, he added, was ready to help the "people of Cuba realise the blessings of liberty".

FIDEL CASTRO Born in 1926 to a wealthy, landowning family Took up arms in 1953, six years before coming to power Brother Raul was deputy and Che Guevara third in command Has outlasted nine American presidents Target of many CIA assassination plots Daughter is a dissident exile in Miami Castro's life in pictures

In the UK, Prime Minister Gordon Brown's spokesman said Mr Castro's departure opened the way for a peaceful transition to a pluralist democracy.

China described Mr Castro as an old friend and said it would maintain co-operation with Cuba.

Mr Castro announced his resignation in a letter published on the website of the Cuban Communist Party's newspaper Granma in the middle of the night, Cuban time.

He said he was "not in a physical condition" to continue as president and commander-in-chief but promised to remain "a soldier of ideas", writing essays entitled Reflections of Comrade Fidel.

The National Assembly is widely expected to elect Raul Castro as Fidel's successor. He has mooted major economic reforms and "structural changes".

But some analysts see a possible generational jump, with Vice-President Carlos Lage Davila, 56, a leading contender.

Raul Castro has worked to ensure a smooth political transition, keeping the army loyal to the regime and strengthening the Communist Party's hold by introducing reforms and weeding out corrupt officials.