The move to free up the courts from politics is a key element of sweeping reforms being put in place by the country's emergency government, which has pledged to root out corruption once and for all before new elections next year.
"Undoubtedly, it is a historic and momentous day in the history of Bangladesh," said Fakhruddin Ahmed, the head of the army-backed administration.
"After 200 years of colonial rule and some 36 years after the establishment of independent Bangladesh, today the country's judiciary has been separated from the executive branch, as per directive of the constitution," he said.
"This day will be a milestone in establishing the rule of law and justice.
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Bangladesh inherited its judicial system from the British colonial rulers when it was part of India.
Under the system, government's civil service officers used to perform the jobs of judges in addition to their regular administrative work, meaning the government could easily interfere in court judgements and