7 February 2015
Last updated at 22:57 ET
Prime Minister Haider al-Abadi said he had taken the decision to help normalise life in Baghdad.
It came despite a string of explosions in the capital which killed at least 32 people on Saturday.
Residents had previously had their movements restricted between the hours of 00:00 and 05:00.
Following the decision to lift the curfew, Iraqis ventured out on to the streets flying flags and honking car horns.
"Before, we felt like we were in prison," said cafe owner Faez Abdulillah Ahmed, speaking to AFP news agency. "We were restricted."
Shop owner Marwan Hashem added: "We were waiting for this decision for years."
The curfew was introduced as a security measure in the violent aftermath of the 2003 US-led invasion.
An official from Mr Abadi's office said the decision to lift it had been made "despite the existence of a state of war", AFP news agency reports.
Bombings and explosions remain a fact of life for many in Iraq's capital.
Ministers have also had to deal with the threat of Islamic State (IS) militants seizing large swathes of territory close to the city.
At least one of Saturday's bombings was claimed by IS, according to the Site Intelligence Group, which monitors jihadi activity.
It was carried out by a suicide attacker who detonated his explosives near a restaurant, killing at least 22 people.
There were also a series of separate blasts on Saturday, including one at a central market.
An interior ministry spokesman said he did not believe the attacks were connected with the government's decision to end the curfew, Reuters news agency.
Last year there were fears that IS gunmen might attack Baghdad following their sweep across Iraq and Syria.
But following Western intervention against the group, the government has regained some of its lost territory.
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Are you in Baghdad? How have you been marking the end of the curfew? You can email haveyoursay@bbc.co.uk with your experience.
Please include a telephone number if you are willing to be contacted by a BBC journalist.
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by Sunita Kureishi and Biodun Iginla, BBC News
People in Baghdad have been celebrating the lifting of a 12-year-old curfew in the Iraqi capital.
Pictures on social media showed people dancing in the streets
as the restriction came to an end at midnight local time (21:00 GMT).Prime Minister Haider al-Abadi said he had taken the decision to help normalise life in Baghdad.
It came despite a string of explosions in the capital which killed at least 32 people on Saturday.
Residents had previously had their movements restricted between the hours of 00:00 and 05:00.
Following the decision to lift the curfew, Iraqis ventured out on to the streets flying flags and honking car horns.
"Before, we felt like we were in prison," said cafe owner Faez Abdulillah Ahmed, speaking to AFP news agency. "We were restricted."
Shop owner Marwan Hashem added: "We were waiting for this decision for years."
The curfew was introduced as a security measure in the violent aftermath of the 2003 US-led invasion.
An official from Mr Abadi's office said the decision to lift it had been made "despite the existence of a state of war", AFP news agency reports.
Bombings and explosions remain a fact of life for many in Iraq's capital.
Ministers have also had to deal with the threat of Islamic State (IS) militants seizing large swathes of territory close to the city.
At least one of Saturday's bombings was claimed by IS, according to the Site Intelligence Group, which monitors jihadi activity.
It was carried out by a suicide attacker who detonated his explosives near a restaurant, killing at least 22 people.
There were also a series of separate blasts on Saturday, including one at a central market.
An interior ministry spokesman said he did not believe the attacks were connected with the government's decision to end the curfew, Reuters news agency.
Last year there were fears that IS gunmen might attack Baghdad following their sweep across Iraq and Syria.
But following Western intervention against the group, the government has regained some of its lost territory.
When 'bombers' meet victims on TV
Country profile
Are you in Baghdad? How have you been marking the end of the curfew? You can email haveyoursay@bbc.co.uk with your experience.
Please include a telephone number if you are willing to be contacted by a BBC journalist.
Or comment here:
Send your pictures and videos to yourpics@bbc.co.uk or text them to 61124 (UK) or +44 7624 800 100 (international). Or you can upload here.
Read the terms and conditions.
From other news sites
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The Guardian Nigeria Baghdad celebrates lifting of curfew after 12 years 1 hr ago
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Emirates247 Iraqis fete curfew end with flags, horns, tyre smoke 3 hrs ago
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NDTV Iraqis Fete Curfew End With Flags, Horns and Tyre Smoke 6 hrs ago
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Yahoo! UK and Ireland Iraq lifts years-old curfew in Baghdad 9 hrs ago
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Mail Online UK Bombings in Iraqi capital kill 32, hours before curfew ends 10 hrs ago
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