Iran agreed to curb its nuclear programme for the next six months in exchange for limited sanctions relief, in a preliminary accord meant to lay the foundations for a comprehensive agreement later this year.
The deal was reached in marathon talks in Geneva that ended Sunday before dawn after long tractions between Iran and the five permanent members of the UN Security Council plus Germany.
Tehran's arch-foe Israel slammed the deal as a "historic mistake" that left open the capability for the Islamic republic to develop a nuclear arsenal.
But the six powers involved hailed it as a key first step that for now warded off the prospect of military escalation -- a geopolitical breakthrough that would have been unthinkable only months ago.
"Today, the United States together with our close allies and partners took an important first step toward a comprehensive solution that addresses our concerns with the Islamic Republic of Iran's nuclear programme," US President Barack Obama said in Washington.
UN Secretary General Ban Ki-moon said the deal "could turn out to be the beginnings of a historic agreement" for the Middle East.
Tehran boasted at home that the accord recognised its "right" to enrich uranium -- which it says is for peaceful purposes -- but Western leaders said the deal made no such reference.
Under the deal, Tehran will limit uranium enrichment -- the area that raises most suspicions over Iran's alleged nuclear weapons drive -- to low levels that can only be used for civilian energy purposes.
It will neutralise its stockpile of uranium enriched to higher 20-percent purity -- very close to weapons-grade -- within six months, US Secretary of State John Kerry said in Geneva after clinching the deal.
Iran will not add to its stockpile of low-enriched uranium, nor install more centrifuges or commission the Arak heavy-water reactor, which could produce plutonium fissile material.
UN atomic inspectors will also have additional, "unprecedented" access, Kerry said, including daily site inspections at the two enrichment facilities of Fordo and Natanz.
In exchange, the Islamic republic will receive some $7 billion (5.2 billion euros) in sanctions relief and the powers promised to impose no new embargo measures for six months if Tehran sticks to the accord.
But the vast raft of international sanctions that have badly hobbled the Iranian economy remain untouched.
The interim sanctions relief was "limited, temporary, targeted, and reversible," the White House said, stressing that "the vast bulk of our sanctions, including the oil, finance, and banking sanctions architecture" will stay in place.
Right to uranium enrichment?
Hassan Rouhani, whose election as Iran's president in June raised hopes of a thaw with the West, insisted "Iran's right to uranium enrichment on its soil was accepted in this nuclear deal by world powers".
But Kerry was adamant: "This first step does not say that Iran has the right of enrichment, no matter what interpretative comments are made."
British Foreign Secretary William Hague told the BBC that only a final, comprehensive accord -- if reached -- would grant Iran a "right" to peaceful nuclear energy.
"The (interim deal) document does not resolve the argument about whether there is such a thing as the right to enrich," Hague told the BBC.
Russia said it was a win-win deal, while Iran's other ally China said the document would support stability in the Middle East.
But President Vladimir Putin also echoed Obama's note of caution: tougher battles surely lie ahead.
"A breakthrough step has been made, but only the first on a long and difficult path."
France called Sunday's deal "an important step in the right direction."
The next six months will see Iran and the United States, China, Russia, France, Britain and Germany negotiating the more comprehensive deal.
Joel Rubin, director of policy for the foundation Ploughshares Fund, warned the hardest work may still lie ahead.
"This is going to challenge all of the feelings, and conceptions and ideologies and emotions that have been pent up in the US, in the West and in Israel and elsewhere for decades. It's going to be a very, very hard task," he said.
Sanctions have 'begun to crack'
The deal was reached at the third round of talks between the P5+1 and Iran since Rouhani replaced the more hawkish Mahmoud Ahmadinejad in August.
Much of the groundwork was apparently made in secret US-Iran bilateral meetings over past months, according to a report by the Al-Monitor news website.
Iranians, many of whom see the nuclear programme as a source of national pride, are impatient to see a lifting of sanctions that have more than halved Iran's vital oil exports since mid-2012.
"The structure of the sanctions against Iran has begun to crack," Rouhani claimed after the signing Sunday.
Supreme leader Ali Ayatollah Khamenei, who last week described Israel as a doomed "rabid dog", hailed the deal as an "achievement".
For ordinary Iranians, news of the breakthrough was a moment of unbridled joy, with expectations that lives made miserable by sanctions would get better.
Their weakened money, the rial, strengthened Sunday after the deal, and a sense of relief flowed through Iranian streets and internet social networks.
"I am not opposed to the enrichment right. But I am entitled to other rights as well: the right to have a job, to see the development of my country," wrote one Iranian internet user, Saghar.
Israel, though, virulently criticised the agreement, with Prime Minister Benjamin Netanyahu telling his cabinet that "what was achieved... in Geneva is not a historic agreement but rather a historic mistake".
Many in Israel believe Iran's only goal is to develop a nuclear arsenal with which to threaten their country, and want the Islamic republic's nuclear facilities dismantled for good.
Kerry said the deal extends the "breakout" time needed by Iran to develop nuclear weapons and thus "will make our partners in the region safer. It will make our ally Israel safer."
Many hardliners in the United States charged that Obama was being too soft on Iran.
Hawkish US lawmakers said they wanted to up the pressure on Iran to force it to go beyond the hard-won deal and start dismantling existing nuclear infrastructure.
One, Republican Senator Mark Kirk, said he would help craft new sanctions legislation "if Iran undermines this interim accord or if the dismantlement of Iran's nuclear infrastructure is not underway by the end of this six-month period".