The Northern Ireland-based battalions of the Royal Irish Regiment are to be disbanded as part of the Army response to the IRA ending its armed campaign.
The RIR's NI-based battalions are to be disbanded
The Army will end its support role to the police on 1 August 2007, the same day that the battalions will disband.
Northern Ireland Secretary Peter Hain set out a two-year plan on demilitarisation which he said would be contingent on the security situation.
Unionists reacted angrily to the move, which nationalists have welcomed.
More than 3,000 soldiers serve in the three battalions, many part-time.
News of the decision was broken to them on Monday morning.
Under the security normalisation plans, Army observation posts will be closed and police stations will be defortified.
Mr Hain also announced on Monday that troop levels in the province would fall from 10,500 to 5,000 in two years time.
The government also aims to repeal within two years counter terrorist laws particular to Northern Ireland if everything goes according to plan.
Twenty-six army sites out of 40 across Northern Ireland will be closed.
Mr Hain said: "The programme published today will see the creation of an environment which will allow the return of conventional policing across Northern Ireland."
The Royal Irish Regiment was formed in 1992, with the merger of the Royal Irish Rangers and the Ulster Defence Regiment.
The Army's general officer commanding, Lieutenant General Sir Reddy Watt said: "The Royal Irish Regiment (Home Service) and their predecessors, the Ulster Defence Regiment, have played a crucial role in creating the enabling environment for normalisation to begin.
"Once the Police Service of Northern Ireland no longer needs routine military support, the three Home Service battalions will have successfully completed the task for which they were raised."
DUP leader Ian Paisley said while Mr Hain may believe the statement will bring forward devolution "the reality is that it will delay its return".
"The government's so-called normalisation programme will have a profound effect on the political process in Northern Ireland," he said.
"It is a surrender to the IRA and is further evidence of bad faith on the part of the government.
"We are appalled at the dishonest and dangerous approach of the government with today's announcement of 'normalisation' and we want to make it clear that it will pay a high price for the approach that is being taken."
DUP leader Ian Paisley said the move was a 'surrender' to the IRA
Ulster Unionist leader Sir Reg Empey described the move as "deplorable".
"The decision to disband the home battalions of the Royal Irish Regiment is reckless and premature," he added.
However, Sinn Fein's Conor Murphy called on unionists to embrace demilitarisation.
"I have to ask who wants to live in a heavily militarised society. It is for all our benefits, unionists as well as nationalists and republicans, to see society here demilitarised," he said.
The SDLP's Alex Attwood said the demilitarisation moves were "sensible when it comes to creating a more normal society" in Northern Ireland.
He said they would have happened a long time ago if the IRA had done what it was supposed to have.
Alliance leader David Ford said the two-year plan was premature without actions from the IRA.
"The IRA statement said nothing about accepting the legitimacy of either the northern or southern state with respect to policing and criminal justice," Mr Ford said.
Meanwhile, the no-jury Diplock courts should be abolished under the government's normalisation plans, government sources have said.
The plans envisage the repeal of counter terrorist legislation particular to Northern Ireland by August 2007.
Government sources said that means the law which provides for scheduled offences currently used in paramilitary related cases.
Other UK wide anti-terrorism laws will still apply in the province to provide protection against subversive activity.
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."
On Friday, the Army began the first steps of dismantling security bases in south Armagh after the IRA's statement saying it had ended its armed campaign.
In a statement released on Thursday, the IRA said it would pursue exclusively peaceful means.