Analysts say Raul is unlikely to make radical political changes to the one-party state and his brother will remain influential as first secretary of he Communist party.
Castro's influence is also likely to continue across Latin America.
Al Jazeera's Teresa Bo, reporting from Caracas, the Venezuelan capital, said many Latin American leaders were inspired by Castro's revolution and admired his fight against the US.
Luiz Inacio Lula da Silva, the Brazilian president, described Castro as a "living legend" while Hugo Chavez, the Venezuelan leader and close Castro ally, paid fresh tribute to Castro and said the "Cuban revolution "doesn't depend on one person".
Castro's retirement brings an end to a political career that survived the Cold War, assassination attempts by the CIA, nine US presidents and the breakup of the Soviet Union.
He came to power in 1959 in a communist revolution that overthrew Fulgenico Batista, the then president.
Famous for his long speeches delivered in his green military fatigues, Castro won admiration in many countries as an icon of socialism and for standing up to the US, which led to a crippling political and economic blockade of the Caribbean island.
But he was considered by some to be a dictator who suppressed freedom of speech.