The leader of the 1959 Cuban Revolution, and the man who outlasted nine hostile U.S. presidents, Castro said in his address to the nation that he could not consent to be elected president of the National Assembly and commander-in-chief of the armed forces due to health problems.
President George W. Bush had earlier said he hoped the retirement of the Cuban leader would be the beginning of 'democratic transition' in Cuba.
A former Soviet ambassador to Cuba, Vitaly Vorotnikov, said that a thaw in Cuban-U.S. relations was "highly unlikely with the current Washington administration."
Meanwhile, Vorotnikov warned that it was too early to talk about Castro's departure. "Currently we only have a written declaration by Castro saying he has no claims on the country's leadership."
"Castro's departure does not mean that the red flag [of communism] over Cuba has been lifted but merely implies that an orthodox Marxist regime could start to change," Russian senator Mikhail Margelov said.
He also said it was unlikely that another 'orange' revolution could occur in Cuba. "It should have been ordered before," the senator said.
"It is difficult to say what kind of reforms await Cuba, but I doubt it will become a pro-American Panama or Haiti," Margelov said.
The 81-year-old Castro underwent stomach surgery in July 2006, handing over 'temporary' power to Raul Castro. His appearances have been far and few between since.
In December 2007, Castro announced he would not "cling to power" and stand in the way of a new generation of leaders. The announcement raised speculation that Castro's days as Cuban leader could be numbered.
The National Assembly is now expected to elect Castro's 76-year-old brother Raul as his successor. There has also been speculation that vice-president, Carlos Large, 56, could become Cuba's new leader.
As one of the few surviving iconic figures of the 20th century, Castro's departure as an active political figure opposed to 'U.S. imperialism' leaves a gap that only perhaps Hugo Chavez, the controversial and charismatic leader of Venezuela, will be able to fill.