Fidel Castro today announced his retirement as the Cuban head of state, 49 years after seizing power in an armed revolution.

The US and UK welcomed the move as a chance for Cuba to begin moving towards democracy, although Washington said it was unlikely to remove its long-standing trade embargo, even without Castro in charge.

The 81-year-old leader - who handed interim power to his brother, Raúl, after undergoing surgery in July 2006 - said in a letter, published on the site of the official state newspaper, Granma: "I communicate to you that I will not aspire to or accept ... the position of president of council of state and commander in chief."

Raúl Castro, 76, is considered the most likely candidate to be appointed as the new president by the Cuban parliament.

Fidel Castro had not appeared in public for almost 19 months after being hit by an undisclosed illness, believed to be intestinal.

His retirement brings down the curtain on a political career that spanned the cold war, CIA assassination attempts and the demise of Soviet communism.

He has outlasted nine US presidents, spending longer in power than any leader who was not a monarch.

Word of his retirement spread slowly on Cuba, with state-run radio only carrying the news at around 5am local time (10.00 GMT) - several hours after his resignation statement was posted on the internet.

"It is like losing a father," Luis Conte, an elderly Cuban man, told the Associated Press.

The US president, George Bush, said Castro's resignation marked a potential opportunity for Cuba's 11.2 million people.

"The international community should work with the Cuban people to begin to build institutions that are necessary for democracy," Bush told reporters during a visit to Rwanda.

The US president's comments were backed Downing Street. A spokesman for the prime minister, Gordon Brown, said: "Our position on Cuba is a long-standing one, which is that we have always sought to encourage a peaceful transition to democracy in Cuba.

"Anything which encourages progress down that path is something we would welcome."

However, it appears unlikely that Cuba will see any loosening of the four-decade US economic embargo - which has severely constricted the Cuban econony - soon.

"I can't imagine that happening any time soon," the US deputy secretary of state, John Negroponte, said when asked whether Washington would lift the embargo.

Although Castro has stepped down as president, he remains a member of parliament and is likely to be elected to the 31-strong council of state.

He will also retain his powerful post as the first secretary of Cuba's Communist party.

A new parliament, elected in January, will meet on Sunday. In turn, it will elect a new president in March - just as the US goes through the process of choosing its own presidential candidates.

Raúl Castro was second in the Cuban power structure, serving as the defence minister until taking over from his brother in July 2006.

However, it had always been felt that his role would be temporary, with a younger person taking over in the long term. One of the current favourites for the position is Carlos Lage, the 56-year old vice president.

Lage, a paediatrician by profession, has risen to prominence in recent months after overseeing economic changes in Cuba. These have included negotiations over oil from Venezuela, whose president, Hugo Chávez, is Castro's strongest international supporter.

Castro's rise to power began on New Year's Day 1959. His almost 50 year rule of absolute control kept Cuba among the world's five last remaining communist countries, long after the breakup of the Soviet Union and the collapse of communism across eastern Europe.

Many attempts by the US to topple the communist state, just 90 miles from the south of Florida, were resisted.

The US was the first country to recognise Castro's new role as leader after his guerrilla movement drove out then president, Fulgencio Batista.

However, the two countries quickly clashed over Castro's increasingly radical path, which saw many American properties and businesses seized.

Two years later, he declared his revolution to be socialist and soon invited aid from fellow communist state the Soviet Union. His reign saw one of the most traumatic periods of history, during which the world came close to nuclear war.

Following the disastrous CIA-backed Bay of Pigs invasion in 1961, the US discovered nuclear-armed missiles on the island, which led to a showdown until the Soviet Union agreed to remove them.

The fall of the Soviet Union plunged Cuba into financial crisis until the late 90s, when it slowly recovered, helped by a tourism boom.

A charismatic leader, Castro is famous for his long speeches, delivered while wearing green military fatigues, and his cry of "socialism or death".

Supporters have praised his ability to provide high levels of healthcare and education for Cuban citizens, while keeping the country fully independent of the US.

However, his critics describe him as a dictator whose rule denied civil liberties such as freedom of speech and movement, and saw many of his opponents thrown into jail.