Critics argue that major violations of human rights have been carried out in the former breakaway republic under the auspices of the military presence.
People living in Grozny, Chechnya's capital, cheered and waved Russian and Chechen flags in reaction to Thursday's news.
Nikolaus von Twickel, a reporter from the Moscow Times, told Al Jazeera that while the decision to end the operation was likely to be welcomed by most people in Chechnya, it was not unexpected.
"The situation on the ground has become relatively stable. So the news this morning wasn't that much of a surprise really," he said.
Road to peace
The "counter-terrorist operation" was approved in 1999 by Boris Yeltsin, the former Russian president, who sent troops in to end the Muslim-majority region's short-lived independence.
There are still sporadic clashes between separatists and troops, but the opposition has largely been silenced under the local leadership of Ramzan Kadyrov.
Kadyrov, who abandoned the separatist cause to become president, is alleged to have allowed the kidnap, torture and murder of opponents and is seen as a brutal stooge of the Russian leadership.
Kadyrov, who is backed by the Kremlin, expressed "great satisfaction" over the announcement.
"Today Chechnya, as thousands of guests can testify, is a peaceful developing area and the cancellation of the operation will only encourage its economic growth," he told Russia's Interfax news agency.
"The militant leaders, on whose conscience lies the pain and suffering of thousands of people, have been eliminated, captured or taken to court."
Russia has withdrawn most of its army units from Chechnya, but thousands of police from other Russian regions and scores of special service units still patrol there.