But within hours of the announcement of the referendum result, shots were fired near the UN compound in the capital, Dili, as pro-Jakarta militias showed their opposition to independence.
United Nations Secretary-General Kofi Annan said 78.5% had voted in favour of independence. Only 21% backed the alternative - autonomy under continued Indonesian rule.
"The people of East Timor have rejected the proposed special autonomy and expressed their wish to begin a process of transition toward independence," Mr Annan said.
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"This is the true will of the people of East Timor. We expected it," said Yenny Rosa Damayanti, an East Timor human rights worker.
Horta 'overjoyed'
Exiled independence campaigner and Nobel peace laureate Jose Ramos-Horta acclaimed East Timor's bravery in resisting "criminal elements (and) hardliners."
"I am overjoyed. I pay tribute to my extraordinary people - what a lesson of courage and democracy," he said.
But the result has raised fears that anti-independence militias will intensify their violent campaign to remain part of Indonesia.
Independence celebrations took place behind closed doors as heavily armed police patrolled Dili, and small groups of pro-Jakarta militias were also on the streets.
Houses burning
In the towns of Maliana and Ermera, houses were reported to be burning and anti-independence militias were on the streets.
UN staff are reported to have been evacuated from the towns of Los Palos and Same after militiamen went on the rampage.
Peace plea
Announcing the result of the referendum in New York, the UN secretary-general called for an end to the violence.
He urged the Indonesian Government to carry out its responsibility to maintain law and order and ensure the successful culmination of the ballot.
Indonesia remains responsible for security until its parliament ratifies the referendum in November.
Mr Annan said: "After 24 years of conflict, East Timor now stands on the threshold of what we all hope will be a process of orderly and peaceful transition towards independence.
"The coming days, however, will require patience and calm from the people of East Timor. I hardly need stress how important it is for its leaders to exercise wisdom and reason," he added.
Indonesian President BJ Habibie said his government accepted the result of the referendum.
He appealed for calm in the territory and said he had told security forces to take firm action against troublemakers.
50,000 fleeing
BBC Jakarta correspondent Jonathan Head says everything depends on the powerful Indonesian armed forces, who are still giving support to the militias.
The leading militia figure, Eurico Guterres, flew to
Jakarta, apparently for talks with military chief General Wiranto.
Click here to see the latest East Timor flashpoints
The violence has cost the lives of at least four UN staff and a reported 24 civilians in Maliana since Monday's vote. Another six UN workers have gone missing.
Peacekeeping force
The UN refugee agency (UNHCR) says some 50,000 people fleeing the violence are now displaced throughout the province.
Pressure has been mounting for the UN to deploy armed peacekeepers in East Timor.
Jailed East Timorese separatist leader Xanana Gusmao on Saturday called on the UN Security Council to urgently send an international peacekeeping force to the territory.
"I appeal to the secretary-general of the UN to convene an emergency meeting of the UN Security Council to decide on the sending of multinational forces to save the Maubere (East Timorese) people from a new genocide," he said in a written statement.
The Indonesian foreign minister said Mr Gusmao could be freed earlier than the 15 September release date given last month.
The East Timorese leader, who was captured in 1992, has been under house arrest in Jakarta since February.
Refugees
Indonesia has been making plans to evacuate up to 250,000 people if the violence intensifies.
Indonesian forces, which invaded East Timor in 1975, have been widely accused of doing little to control the militant groups that want the territory to remain part of Indonesia.
Three Hercules military transport planes arrived in Dili on Friday carrying an unknown number of army reinforcements.
Indonesian Defence Minister General Wiranto said he was sending another 1,400 soldiers to East Timor. The police said they would send an additional 400 specially trained officers on Saturday and Sunday.
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