The Duke and Duchess of Sussex say they are to step back as "senior" royals and divide their time between the UK and North America.
The couple, who have a baby son, Archie, said they plan to carve out a "progressive new role" in the Royal Family and intend to "work to become financially independent".
What's behind the decision?
It was reached after many months of reflection and internal discussions, they said.
In October, the public got a glimpse into the couple's mindset in an ITV documentary filmed during a tour of Africa.
The Duchess of Sussex admitted adjusting to royal life had been "hard" and she had not been prepared for the intensity of the media scrutiny, despite warnings from her British friends that the tabloids could "destroy" her life.
Asked whether she was coping, Meghan, a new mother, said: "I have said for a long time to H - that is what I call him - it's not enough to just survive something, that's not the point of life. You have got to thrive."
Prince Harry also described his mental health and the way he deals with the pressures of his life as a matter of "constant management".
Following their decision to step back as senior royals, BBC royal correspondent Jonny Dymond said there were "great chunks" of the job that the couple "simply could not stand", while Harry "hated the cameras and was visibly bored by the ceremonial".
Towards the end of last year, Prince Harry said he and Meghan were to take legal action against the Mail on Sunday over a claim it unlawfully published one of her private letters. The paper stands by its story.
At the time, an unrestrained Harry said: "I lost my mother and now I watch my wife falling victim to the same powerful forces."
Referring to his mother, Diana, Princess of Wales' sudden death in 1997, he said: "I've seen what happens when someone I love is commoditised to the point that they are no longer treated or seen as a real person."
What has the rest of the Royal Family said?
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The BBC understands no other royal, including neither the Queen nor the Prince of Wales, was consulted before the unexpected statement was released on Wednesday evening.
A palace spokeswoman told the BBC the Royal Family was "disappointed".
She said discussions with the couple were at an early stage.
"We understand their desire to take a different approach, but these are complicated issues that will take time to work through," she added.
BBC royal correspondent Jonny Dymond said the lack of consultation was likely to sting.
"This is clearly a major rift between Harry and Meghan on one part, and the rest of the Royal Family on the other," he said.
What's been the wider reaction?
Royal commentator Dickie Arbiter, a former Buckingham Palace press officer, compared the couple's move to Edward VIII's abdication in 1936 in order to marry twice-divorced American Wallis Simpson.
"That is the only other precedent but there's been nothing like this in modern times," he said.
Within three hours of the statement being posted on the Sussexes' Instagram account, it had been liked more than 900,000 times.
"Good for you," said many in response, but others were less encouraging.
"Another Wallis Simpson. Shows Americans don't have the fortitude to be royal," said one.
TV broadcaster Piers Morgan blamed Meghan for the couple's split from the Royal Family and the falling-out between Harry and his older brother, Prince William.
Writer and journalist Caitlin Moran said on Twitter that the couple could "earn their dollar and be free of the miserably undefined job of being royal - what other sane decision could you make, after the last year?"
US author and culture critic Mikki Kendall tweeted: "Harry has been very clear that he didn't want the throne, the titles, none of it. That was true long before Meghan was on the scene.
"It's just that now he's far enough out of the line of succession to leave," she wrote of Harry, who is sixth in line to the throne after Prince Charles, Prince William and William's three children.
And Janet Mock, another US writer, welcomed Meghan's promised return.
What will happen next?
The couple say they will split their time between the UK and North America and launch a new "charitable entity".
Exactly where and exactly what are both unclear.
Over Christmas, Harry and Meghan took an extended break from royal duties, including time spent in the Canadian province of British Columbia.
And their first royal engagement of the year was to visit Canada's High Commission in central London to thank Canadians in person for the warm welcome they received.
While acting in the US drama Suits, Toronto became an adopted city for Meghan. It is home to her friends, Jessica and Ben Mulroney, the city's "most polished power couple", according to Toronto Life magazine.
It's likely the family would spend time in Meghan's homeland too - her mother, Doria Ragland, lives in California.
Her father, Thomas Markle, with whom Meghan has little contact, lives in Mexico.
In terms of their work, the duke's focus in recent years has been on conservation in Africa and organising the Invictus Games for injured members of the armed forces. Meghan's growing portfolio has included the National Theatre and charity Smart Works.
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What else have they said?
The couple have also updated the section of their website which outlines their attitude to the media.
The duke and duchess said they would be adopting a "revised media approach to ensure diverse and open access of their work" in 2020.
Included in this new strategy, Harry and Meghan said they would "engage with grassroots media organisations and young, up-and-coming journalists".
They will also pull out of the so-called royal rota system, where journalists and media representatives are given exclusive passes to cover royal engagements on the understanding they share all the material they gather.
"The current system predates the dramatic transformation of news reporting in the digital age," the couple said in a statement on their website.
Under a heading asking what Harry and Meghan's stance is on the media in general, the couple said they believe in a "free, strong and open media" which "upholds accuracy and fosters inclusivity, diversity and tolerance".
"Their Royal Highnesses recognise that their roles as members of the Royal Family are subject to interest, and they welcome accurate and honest media reporting as well as being held to account if appropriate. Equally, like every member of society, they also value privacy as individuals and as a family."
The couple said they would continue to use social media, including their Instagram account which has 10.1m followers, to "personally share moments in their lives directly with members of the public".
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