Welsh Secretary Alun Michael handed a copy of the Transfer of Functions Order to the National Assembly's Presiding Officer Lord Dafydd Elis-Thomas on Wednesday afternoon in a ceremony to mark the handover of power.
The historic power shift came into effect at midnight. All the executive functions of the existing Welsh Office will, from now on, be carried out by the National Assembly.
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Mr Michael said the transfer was "the most significant day in the devolution process".
"Our work now begins for real. This is the end of one phase of the devolution process and the beginning of a new chapter for Wales.
"It is vital that we do not now lose sight of our real purpose. We are here to serve the people. Whatever our party and background it is vital to put them first," he said.
The devolution process started when the Labour Party came to power in 1997 promising referendums on devolution in Wales and Scotland.
Growing move for devolution
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Demands for such a reform had increased in the two nations during the previous 18 years when they were governed by Conservative governments, despite having voted mainly against the party.
In Wales, the appointment during that period of four successive secretaries of state who did not represent Welsh seats intensified devolution calls.
However, when the devolution referendum for Wales was actually held on 18 September 1997, the government's proposals for a Welsh Assembly were endorsed by a margin of fewer than 7,000 votes.
The government pressed ahead with its plans, and the Government of Wales Act was passed by Parliament, authorising the National Assembly to be set up in 1999.
The elections to the new 60-member body were held on 6 May and resulted in surprising gains for the Welsh nationalist party, Plaid Cymru, who scooped 17 seats, including some which had been considered safe for Labour.
The election of nine Conservatives and six Liberal Democrats meant that Labour were short of the 31 members they needed for a majority government in Wales.
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However, Mr Michael, who had been controversially elected by Labour as the assembly first secretary by means of an electoral college, decided to avoid a coalition and form a minority administration.
The assembly was officially opened by the Queen and Prince Charles on 26 May at its temporary home in Cardiff Bay. A new assembly chamber is being built close to the office building where the body currently meets.
The transfer of powers marks the coming of age of the first Welsh government since Owain Glyndwr established a parliament for Wales at the turn of the early 15th century.
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