Fighters in Syria and Iraq have announced the establishment of a "caliphate", referring to the system of rule that ended nearly 100 years ago with the fall of the Ottoman empire, Al Jazeera reported.
In an audio recording distributed online on Sunday, the Islamic State of Iraq and the Levant (ISIL) declared its chief Abu Bakr al-Baghdadi as "the caliph" and "leader for Muslims everywhere".
Baghdadi is believed to be the leader of ISIL, which announced that it is now called "The Islamic State".
According to the statement, the new caliphate stretches from Iraq's Diyala province to Syria's Aleppo.
"The Shura (council) of the Islamic State met and discussed this issue (of the caliphate)... The Islamic State decided to establish an Islamic caliphate and to designate a caliph for the state of the Muslims," said ISIL spokesman Abu Mohammad al-Adnani.
"The words 'Iraq' and 'the Levant' have been removed from the name of the Islamic State in official papers and documents," Adnani said, describing the caliphate as "the dream in all the Muslims' hearts" and "the hope of all jihadists".
Al Jazeera's Imran Khan reporting from the Iraqi capital, Baghdad, said that a caliphate is effectively an Islamic Republic led by one leader, regardless of national boundaries.
With the announcement, the armed group is declaring that they are now legitimate, declaring the caliphate as the "true muslim state", he said.
The announcement might bring up problems with other Sunni fighters in Iraq, who are fighting the central government of Prime Minister Nouri al-Maliki, and not fighting for the caliphate, our correspondent said.