Cuba and the US have opened full embassies in Havana and Washington.
Just after midnight local time, the diplomatic missions of each country became full embassies.
The two countries formally restored diplomatic relations after an agreement struck in December 2014 putting aside decades of hostility came into force.
Despite the historic shift, Cuba and the US admit to lingering difficulties.
There were still “issues that we don’t see eye to eye on”, a US state department spokesman said.
Restrictions on Americans wanting to travel to Cuba remain in place, as does the wider US trade embargo banning most American companies from doing business in Cuba.
Cuba says the embargo – which it calls a blockade – is hugely damaging to its economy.
Cuban President Raul Castro has urged President Barack Obama to lift it, calling it the main stumbling block towards normalizations. But the US Congress would have to vote on the issue.
Barack Obama and Raul Castro announced the move towards diplomatic ties in December 2014.