An offshoot of al-Qaeda which has captured swathes of territory in Iraq and Syria has declared itself an Islamic "caliphate".
It has also called on factions worldwide to pledge their allegiance, according to a statement posted on jihadist websites.
The move is an expansion of the group's ambitions to wage a holy war and posed a direct challenge to the central leadership of al-Qaeda, which has already disowned it.
The group, previously known as the Islamic State in Iraq and Syria (ISIS), also known as ISIL, has renamed itself "Islamic State" and proclaimed its leader Abu Bakr al-Baghadi as "Caliph" - the head of the state, the statement said.
"He is the imam and khalifah (Caliph) for the Muslims everywhere," the group's spokesman Abu Muhammad al-Adnani said in the statement, which was translated into several languages and an Arabic audio speech.
"Accordingly, the "Iraq and Sham" (Levant) in the name of the Islamic State is henceforth removed from all official deliberations and communications, and the official name is the Islamic State from the date of this declaration," he said.
Visiting Fellow at the Brookings Doha Centre Charles Lister saw considerable significance in the move.
"Whatever judgements are made in terms of its legitimacy, (the) announcement that it has restored the Caliphate is likely the most significant development in international jihadism since 9/11.
"The impact of this announcement will be global as al-Qaeda affiliates and independent jihadist groups must now definitively choose to support and join the Islamic State or to oppose it."
Fighters from the group overran the Iraqi city of Mosul last month and have advanced towards Baghdad. In Syria they have captured territory in the north and east, along the frontier with Iraq.
"It is incumbent upon all Muslims to pledge allegiance to (him) and support him...The legality of all emirates, groups, states and organizations, becomes null by the expansion of the khalifah's authority and arrival of its troops to their areas," the statement said.
Iran ready to help Iraq fight revolt
Meanwhile, an Iranian general has said Iran is ready to help Iraq fight an armed revolt using the same methods it deployed against opposition forces in Syria.
His comments suggest the Tehran government is offering to take a larger role in battling Sunni militias threatening Baghdad.
Iranian leaders to date have said they would help defend Shia Muslim shrines in neighbouring Iraq if necessary, but have also said Iraqis are capable of doing that job themselves.
Iran's Supreme Leader Ayatollah Ali Khamanei on 22 June also said he rejected intervention in Iraq by the US or any other outside power against Sunni militants.
ISIS has seized a broad swathe of territory in northern and western Iraq in recent weeks in its quest to topple the government of Prime Minister Nuri al-Maliki, a Shia backed by Iran, and to set up an Islamic caliphate.
Brigadier General Massoud Jazayeri, deputy joint chief of staff of the armed forces and a senior Islamic Revolutionary Guards Corps (IRGC) officer, told Iran's al-Alam television that Iran's response to the militias would be "certain and serious".
His remarks did not provide details on the assistance Iran could give Baghdad, beyond saying Iran could help with what he called popular defence and intelligence.
"Iran has told Iraqi officials it is ready to provide them with our successful experiments in popular all-around defence, the same winning strategy used in Syria to put the terrorists on the defensive ... This same strategy is now taking shape in Iraq- mobilizing masses of all ethnic groups," he told the television station.
"A response is certain and serious," he said. "With Syria, too, we announced we would not allow terrorists in the hire of foreign intelligence services to rule and dictate to Syrian people. We will certainly have the same approach with Iraq."
Shia Iran has spent billions of dollars propping up its ally, Syrian President Bashar al-Assad, in what has turned into a sectarian proxy war with Sunni Arab states.
The help has included hundreds of military specialists, including senior commanders from the elite Quds Force, the external and secretive arm of the IRGC, according to Iranian sources familiar with deployments of military personnel, Syrian opposition sources and security experts.
Mr Assad has also received battlefield support from fighters of the Lebanese Hezbollah movement, which Iran also backs.
Gen Jazayeri said Iran would deal with Iraq on defence, security, border control and fortifications.
To help Iraq, he said, Iran would monitor the situation in the region, as it had done "in Syria and other troubled areas in the region".