East Timor is now an independent nation.
Elaborate independence celebrations were held outside the capital, Dili, to mark the formal withdrawal of the territory's U.N. administrators and the inauguration of the country's president.
The flag of East Timor is raised for the first time over the independent nation. Dozens of international dignitaries were on hand to witness the ceremony, in which U.N. Secretary General Kofi Annan formally handed over rule of East Timor to its own leaders.
"I salute you. I salute you people of East Timor, for the courage and perseverance you have shown. Yours has not been an easy path to independence," he said. "You should be very proud of your achievements. That a small nation is able to inspire the world and be the focus of our attention is the highest tribute I can pay to you.
The raising of the flag was followed by the inauguration of former guerilla leader Xanana Gusmao as East Timor's president.
Tens of thousands of East Timorese gathered on the outskirts of the capital, first to attend mass, and then, to enjoy the festivities. Traditional dancers performed, and hundreds of school children sang, and acted out scenes from Timorese mythology.
Former members of East Timor's guerilla army also paid tribute to those who died in the conflict with Indonesia.
The celebrations marked the end of East Timor's struggle for independence, which stretched for more than two decades. Indonesia invaded East Timor in 1975, and occupied the territory for another 24 years. It granted East Timor independence in 1999, after the majority of its people voted to break free in a U.N.-supervised ballot.
Despite the two nations' troubled past, the crowd warmly welcomed Indonesia's president, Megawati Sukarnoputri, to the celebrations. Ms. Megawati accepted the invitation to attend, despite criticism from some lawmakers. They say Indonesia's loss of East Timor was a blow to national dignity.
During its first full day as an independent nation, East Timor's parliament will hold its inaugural meeting. East Timor's leaders are also expected to sign an oil and gas treaty with Australia, which is expected to bring the new nation billions of dollars in revenues.