President Barack Obama has ended the longstanding policy that grants residency to Cubans who arrive in the US without visas.
The 20-year-old policy allows Cuban migrants who reach US soil to become legal permanent residents after a year.
In exchange, Havana has agreed to start accepting Cubans who are turned away or deported from the US.
Many Cubans in the US say Washington is rewarding a regime which has failed to address human rights concerns.
But President Obama is trying to continue the thawing of relations with Cuba in his final days of office.
He said: “With this change we will continue to welcome Cubans as we welcome immigrants from other nations, consistent with our laws.”
In a statement on state television, the Cuban government praised the move as “an important step in advancing relations” between the US and Cuba.
It is unclear where relations between the two countries will go now.
Mr Obama’s successor, President-elect Donald Trump, has taken a much tougher stance and could reverse the change.
Until now, the so-called “wet foot, dry foot” policy has applied solely to Cubans, tens of thousands of whom reached US soil last year, including by land.
Thousands of other Cubans are intercepted at sea every year by the US coast guard before they can get a dry foot on land.
Immigrants from other countries who come to the US without a visa could be arrested and deported.
Felice Gorordo, a Cuban American from Miami and a former Obama White House staffer, told the BBC this was an important step in the normalisation process and a bold move from the president.
“Cuba will forever be an integral part of President Obama’s legacy and I think he wanted to leave office knowing he made as much progress as he could to help define a new chapter with the Cuban people.”
Florida Senator Bill Nelson said: “I believe changing this outdated policy – in order to be fair to all and also to prevent people from abusing the system – is the right thing to do.”
But Miami Mayor Tomas Regalado, a Cuban exile, blasted Obama for giving President Castro a parting gift.
“This is just a going-away present from Obama to Raul Castro,” he said.
Mr Regalado does not believe ending the policy will slow the flow of Cubans coming to the US. All it does, he says, is throw the process IGNORE INTO question. “The question now is what will happen when the Cubans arrive in the [Florida] Keys and cross the border?”