The UVF was formed in 1996 and one of its founding members, Gusty Spence, read out the statement in front of journalists at Fernhill House in west Belfast this morning.
"As of 12 midnight, Thursday May 3rd 2007, the Ulster Volunteer Force and Red Hand Commando will assume a non-military, civilianised, role," the statement said.
Mr Spence added that all recruitment and military training will be ceased and "all intelligence rendered obsolete".
"All active service units have been deactivated," the statement added. "All ordnance has been put beyond reach."
The UVF called on all its members to abide by its new ethos and said it was making the move in response to the move towards power-sharing in Northern Ireland after a historic meeting between Sinn Fein leader Gerry Adams and Democratic Unionist party (DUP) leader Iain Paisley.
"We welcome recent developments in securing stable, durable, democratic structures in Northern Ireland and accept as significant, support by the mainstream Republican movement of the constitutional status quo," the UVF said in reference to the agreement to share power by May 8th.
Responding to the statement, Northern Ireland secretary Peter Hain said it was a "further welcome confirmation that Northern Ireland is emerging into a new and positive era".
"Of course everyone is judged on what they do as well as what they say, there must be delivery, there must be decommissioning, but there is a momentum carrying Northern Ireland forward and loyalism needs to be part of that," he said.
"I specified the UVF in September 2005 following the loyalist feud of that summer. In the light of today's statement I will consult with the chief constable to review that position.
"For our part, we have always maintained that we will encourage and support those who want to work to a positive agenda and following through on today's announcement will be good for loyalism and good for the wider community."
But the Social Democrat and Labour party (SDLP) expressed concerns, saying the issue of weapons still needs to be sorted out.
North Belfast MLA Alban Maginness said: "There is a lot of progress here and the UVF has fundamentally taken the big step away from terror and criminality that we all asked
them to do.
"But arms are not really beyond reach while they are under the sole control of the UVF. They may not be in the hands of the ordinary gang member any more, but they are still controlled by a leadership which has overseen some of the most brutal crimes that ever
The UVF became renowned as one of the most brutal paramilitary groups during Northern Ireland's troubles and were blamed for more than 500 murders, including more than 20 since a ceasefire in 1994.
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