The US has removed the dissident Iranian group Mujahideen-e Khalq (MEK) from its terror blacklist.
Secretary of State Hillary Clinton formally removed the group after sending a classified opinion to Congress earlier in September.
The organisation had been designated a terror group by the US since 1997.
The MEK led a guerrilla campaign against the US-backed Shah of Iran in the 1970s and also opposed Iran's clerical leaders who replaced the Shah.
Also known as the People's Mujahideen Organisation of Iran, the group insists it has renounced violence.
The state department said its decision had been taken in view of the MEK's public renunciation of violence, the absence of any confirmed acts of terrorism by the organisation for more than a decade and its co-operation in the closure of their paramilitary base in Iraq.
But in its statement, the state department said it had not forgotten the group's past.
"With today's actions, the department does not overlook or forget the MEK's past acts of terrorism, including its involvement in the killing of US citizens in Iran in the 1970s and an attack on US soil in 1992," it said.
A senior official said that the US does not see the group as a "viable opposition".
"We have no evidence and we have no confidence that the MEK is an organisation that can promote democratic values that we would like to see in Iran," the unnamed official told reporters.
Supporters of the MEK had lobbied Congress for years. Iran accuses the group of continued terrorism.
Officials told reporters last week that the decision had been made, ahead of a court-ordered October deadline.
As part of the delisting, assets the MEK holds in the US are no longer blocked, as of Friday.
The group's leader, Maryam Rajavi, said in a statement that the group "welcomed and appreciated" the decision.
"This has been the correct decision, albeit long overdue, in order to remove a major obstacle in the path of the Iranian people's efforts for democracy," she said.
The MEK was given refuge in Iraq by former leader Saddam Hussein, but has fallen out of favour with Iraq's new Shia-dominated leadership.
Members of the group have been based at a refugee camp in Iraq, from where the Baghdad government is taking steps to expel them.
Those backing the MEK have staged a long campaign for the group to be removed from the US terror list - a move that would enable the MEK itself officially to lobby Congress.
Opponents had argued that there was ample evidence to justify keeping the MEK on the terror list.
Republican Congressman Ted Poe, a member of the House foreign affairs committee, who has led calls in support of the MEK, said last week that the expected decision was "long overdue".
Another lawmaker, Dana Rohrabacher, also said: "I am very happy to learn the state department has agreed to delist the Mujahideen, or MEK, from the Foreign Terrorist Organizations List.
"The MEK are Iranians who desire a secular, peaceful, and democratic government."
Britain removed the group of its terror list in 2008, followed by the European Union in 2009.