The Northern Ireland-based battalions of the Royal Irish Regiment -- in which more than 3,000 soldiers serve -- are to be disbanded on Aug. 1, 2007. The army will also end its support role to police.
In total, troops will be reduced from 10,500 to around 5,000, if the security climate allows.
Under the security normalization plan, army observation posts will be dismantled and police stations defortified.
The government also aims to repeal counter-terrorism legislation particular to Northern Ireland, and to enact legislation allowing paramilitary fugitives to come home.
Northern Ireland Secretary Peter Hain announced the moves Monday as part of a two-year plan that, he said, would see the creation of an environment enabling the return of conventional policing across the region.
"Provided the enabling environment is established and maintained this program will be achievable within two years, though if the conditions are right to move more quickly in implementing elements of the plan, the government will do so," he said in a statement.
Hain said his "first and over-riding priority" was the safety and security of the people of Northern Ireland, a priority shared by Northern Ireland Chief Constable Hugh Orde and the Army GOC (general officer commanding Northern Ireland) Lt.-Gen. Reddy Watt.
"We will not do anything that will compromise that."
Unionists, however, reacted angrily to news of the measures, which they said would compromise both security and the political process.
Democratic Unionist Party Leader Ian Paisley said the move was a "surrender to the IRA" and the product of a political deal rather than security considerations.
"Only last week the government indicated that words were not enough and that only actions would be satisfactory from the IRA. However, yet again we see the government prepared to take republicans at their word. Have they learnt nothing from history?"
Speaking to media at Stormont, the seat of the suspended Northern Ireland Assembly, Paisley said while Hain might believe the move would bring forward devolution "the reality is that it will delay its return."
"We alone will dictate when we enter negotiations with the government about devolution. We alone will dictate when, if ever, we enter discussions with Sinn Fein and we alone will dictate when, if ever, and in what circumstances, we enter an administration with Sinn Fein. There is a price which we are not prepared to pay for the return of devolution."
The government would pay "a high price" for the decisions it had taken, he said. The DUP would set out the penalties it would impose when it met the secretary of state and Prime Minister Tony Blair on Wednesday, he added.
"The era of pushover unionism is over."
And Ian Paisley, Jr., of the DUP said there would not be a restoration of power-sharing at Stormont this year or next as a result of the government's decision.
"The prospect of devolution is with us, we hold the veto," he told the BBC.
But Alban Magennis, the Social Democratic and Labor Party's assembly member for North Belfast, told United Press International the DUP had no veto on the political process.
"No matter what amount of bellowing and angry reaction Paisley has, it will not do away with these perfectly good proposals to bring about a more normal life in Northern Ireland."
The DUP might attempt to delay the restoration of devolution but the fact was the vast majority of people in Northern Ireland wanted it, he said.
"He is out of tune with popular feeling in Northern Ireland, particularly after Thursday's statement by the Provisional IRA," he said.
The security normalization program was welcome but belated, he said, mainly due to the obduracy of Sinn Fein, the political wing of the IRA, the obstruction of unionists and the timidity of the British government.
It would help to create a greater sense of normal life in Northern Ireland, embed gains from the peace process and provide the basis for progress on policing and the judicial system, he said.
Conor Murphy, Sinn Fein member of Parliament for Newry and Armagh, stressed the program would benefit both republicans and unionists.
"I have to ask who wants to live in a heavily militarized society. It is for all our benefits, unionists as well as nationalists and republicans, to see society here demilitarized," he said.
Policing, however, is a particularly thorny issue that will have to be resolved before society in Northern Ireland can be considered "normalized."
Many areas, such as the Short Strand in Belfast, are still virtually no-go zones for police, who are viewed as the enemy by many republicans.
Hain says he would like to see Sinn Fein members taking places on Northern Ireland's Policing Board as soon as possible.
However Gerry Adams has made it clear that such a move -- which would mean Irish republicans finally accepting the legitimacy of police -- will not happen until there is progress on devolving policing and justice powers to local politicians. This will require the cooperation of unionists, who are clearly not in the mood for pliancy.
The army has already begun dismantling security installations in South Armagh. On Friday it announced a base at Forkhill would close, as would a watchtower at Sugarloaf Mountain and an observation post at Newtownhamilton police station.
The move followed the IRA's declaration Thursday of the end of more than three decades of armed struggle. The paramilitary group ordered all IRA volunteers to dump arms and to engage in "exclusively peaceful" means to achieve its aim of a united Ireland.
On Monday Chief Constable Hugh Orde said the IRA statement was clearer than anything previously, but "the actions which follow that statement will be crucial."
He added: "We have a right to expect that Sinn Fein politicians will now engage directly, openly and constructively with District Commanders and all officers at local level."