Spain’s Prime Minister Jose Luis Rodriguez Zapatero said any peace process after so many years of horror will be long and difficult.
More than 800 people were killed in ETA’s violent Basque separatist campaign, based in northern Spain and south-west France.
In a statement on Basque television read out by one of three hooded figures against a backdrop of ETA symbols, the movement said its ceasefire would take effect from Friday (March 24), and that it now wants to promote the “democratic process”.
ETA is classed as a terrorist group by the United States and European Union.
The ceasefire announcement meets the key condition for talks with the Spanish government.
Prime Zapatero said Spaniards can now be “united by hope,” but warned of a long road ahead towards lasting peace.
“We will react with prudence to reach the end of this historic drama,” he added.
ETA’s long struggle for an independent Basque homeland was one of Western Europe’s last armed internal conflicts, and was often compared to the decades of sectarian unrest in Northern Ireland.
“The aim of this decision is to launch a democratic process in the Basque country,” ETA said in its broadcast.
“At the end of this process, Basque citizens will be able to have a voice and the power to decide their future,” it went on. “An end to the conflict is possible today and now. This is the hope and desire of ETA.”
Spain’s first deputy prime minister Maria Teresa Fernandez de la Vega said the Socialist government hoped the ceasefire meant the “beginning of the end” of violence.
“This is good news for all Spaniards,” she added, promising the government would “work with all political forces” to achieve peace.
Basque regional leader Juan Jose Ibarretxe spoke of an “historic day” and added he was putting out feelers, including ETA’s banned mouthpiece Batasuna, for round-table talks on the next stage of the region’s development.
“The moment has arrived for Basque society to build its future in peace,” Mr Ibarretxe added.
Spanish Defence Minister Jose Bono described the wording of ETA’s statement as significant.
“They always spoke of a truce, now they speak of a ‘permanent ceasefire’,” he said.
Although ETA’s last fatal attack was in May 2003, it has continued to wage low-level violence with car bombs, attacks on public buildings and extortion, mainly in the Basque region.
Wave of arrests
The organisation has been severely weakened by improved cooperation between French and Spanish police which resulted in a recent wave of arrests.
Analysts also say the new climate after the March 11, 2004, train bombings in Madrid also helped swing attitudes against violence.
Spain’s then conservative government initially blamed ETA for that carnage, which killed 191 people, before evidence emerged that Islamic extremists were responsible.
But with previous ceasefires and truces having lasted no more than months, the leader of Spain’s conservative opposition Popular Party, Mariano Rajoy, said this one was merely “a pause.”
“It is not a renunciation of criminal activity and pre-supposes their desire to continue in existence,” he told reporters, urging ETA to disband.
The parallel with Northern Ireland and its long road to peace has been held up as an example for the Basque region to follow.
Sinn Fein leader Gerry Adams, who has often engaged with Basque leaders in recent years, welcomed ETA’s move and urged the Madrid government to respond.
“ETA’s announcement provides all sides to the conflict with an opportunity of historic proportions,” he said in a statement.