India's Prime Minister Narendra Modi Hindu-nationalist party also moved a bill proposing to divide the territory into two regions to be directly ruled by New Delhi.
The government imposed a security lockdown on the Indian-administered part of Kashmir in the early hours of Monday after deploying tens of thousands of troops in the past week, claiming there was a terror threat.
Home Minister Amit Shah, a close ally of Modi, told parliament the president had signed a decree abolishing Article 370 of the constitution giving special autonomy to the Himalayan region.
The decree said the measure came into force "at once".
Kashmir has been divided between Indian and Pakistan since their independence in 1947. For three decades the Indian-administered part of the territory has been in the grip of an insurgency that has left tens of thousands dead.
Former chief minister of Kashmir Mehbooba Mufti tweeted the latest move was the "darkest day in Indian democracy".
"Unilateral decision of GOI (government of India) to scrap Article 370 is illegal & unconstitutional which will make India an occupational force in J&K (Jammu and Kashmir)," she added.
Modi's Bharatiya Janata Party (BJP) obtained a large parliamentary majority in recent elections and vowed to fulfil a long-held promise to scrap the laws.
A key provision means non-Kashmiris will now be allowed to buy land in the region.