Cuba will end commercial sales in US dollars from 8 November and has blamed US policies for the decision, a statement from the Central Bank in Havana says.
The statement was read over national television on Monday, as Cuban leader Fidel Castro made his first public appearance since undergoing surgery for his knee after a fall last week.
Holding US dollars will remain legal, but using them in commercial transactions will be banned, the statement said.
Cubans will have to use the so-called "convertible peso", a local currency pegged in value to equal the dollar on the island but with no value internationally.
Other foreign currencies will still be accepted for business-to-business sales.
"It is important to denounce the schemes of the [American] empire" against Cuba, Castro said in televised remarks, slamming the 40-year-old US embargo on the island.