Liverpool City Region Mayor Steve Rotheram said the area's move from tier three into tier two was the result of "hard work, dedication and sacrifice".
Leaders thanked "each and every person" as it was announced the area would not remain in the highest restriction tier when the national lockdown ends.
A mass testing pilot in Liverpool has tested 300,000 people for Covid-19, including those without symptoms.
The health secretary said cases in the city region were down by two-thirds.
Matt Hancock paid tribute to the people of Liverpool for "embracing community testing", which he said showed how the country "can beat the virus".
He said it had been "a big team effort across the whole city".
The new tier rules will come into force on Wednesday and differences between the tiers include limits on where households can meet up.
In tier two, the rule of six applies outdoors but there is no household mixing anywhere indoors.
Council leaders and the region's mayors said the area was in "a very dangerous situation" seven weeks ago, with "the highest transmission rates in the country".
The move into tier three was "required" and taken "at the right time", they said in a statement, adding that "many difficult months" now lay ahead.
"We recognised that action was required, but also fought hard for the financial support for our businesses and workers most affected," the statement said.
It also urged people to continue to follow guidance and "use these hard-won freedoms wisely".
When the region first went into tier three restrictions on 14 October, Liverpool had the third highest rate of infections in England with 635 cases per 100,000 and Knowsley had 667.5.
The latest figures show that Liverpool's infection rate as of today was 158 per 100,000, Halton's was 200.9, Sefton and St Helens were both 184.4, Knowsley's rate was 158.8 and Wirral had a rate of 125.9.
Steve Rotheram said the reduction in cases was "a remarkable turnaround" and was down to a "whole host of factors", including mass testing, compliance and messaging.
"The mass testing has contributed hugely but it's not the only thing as numbers right across the five other districts have also fallen steeply. So its about compliance and it is also about messaging," he said.
"We used our football clubs to try and get messaging over. It was about trying to tailor things so that people would receive the message and they've reacted brilliantly to it."
However there have been concerns that people living in deprived parts of the city had not taken part in the mass testing scheme over financial worries.
Liverpool Medical Committee secretary Dr Rob Barnett said those in the city's deprived areas were "more reluctant" to be tested for fear of losing income.
And people working in the hospitality sector are still worried tier two is still bad news for businesses.
Peter Kinsella, owner of Lunya, which has two restaurants in Liverpool, said his industry "will continue to struggle" because the hospitality industry is still constrained under tier two.
"About 75% of restaurant trade is people going out with friends and colleagues and extended family, so you immediately lose that," he said.
New tier two rules also mean changes for sports fans who will now be able to return to grounds, though in very limited numbers, with up to 2,000 fans allowed to go to a match, or 50% of capacity, whichever is lower.
Everton FC said it was in discussions over a possible return of fans to Goodison Park for the Chelsea game on 12 December and Tranmere Rovers said it expected to be able to have 2,000 fans at Prenton Park.
The easing of restrictions was also welcomed by Merseyside clubs in non-league football.
Director of Prescot Cables FC, Matt Roberts, said it was "fantastic" fans would be able to get back into grounds.
"We've had so many frustrations of not having fans in - it has been pretty bad for the local community," he said.
"Everyone has rallied together and really worked to help get the cases down so we can go into tier two so it's fantastic for us."
"It means we can start getting local businesses open and really just start getting the economy back".