People are hopeful and trying to remember and yet celebrate and move on - and yet they have a lot of honour for the victims of 11 September

New York resident

This year, the ball's 500 panels were marked with inscriptions honouring victims of the World Trade Center terror attacks.

It was the last official engagement for New York's Mayor, Rudolph Giuliani. His successor is the billionaire financier Michael Bloomberg.

The city's New Year events began on Monday at 6pm local time, when bells from 400 churches began ringing out in remembrance of the estimated 3,000 people who died when suicide hijackers crashed two airliners into the twin towers of the World Trade Center on 11 September.

Giuliani has been making the most of his last hours in office

Mr Giuliani, whose leadership in the aftermath of the attacks - a period which also saw anthrax mail attacks on media organisations and the crash of an airliner in Queens - won praise both at home and abroad, was at the centre of the ceremony, setting in motion the 500 kilogram crystal ball, which landed at the stroke of midnight.

Four minutes after midnight, to the strains of Frank Sinatra's song New York, New York, Mr Giuliani swore in Mr Bloomberg as the new mayor, ahead of a formal inauguration ceremony later on Tuesday.

While no specific terrorist threat was directed at the event, police with metal detectors scanned people as they entered the square through 16 access points, while dogs trained to sniff out bombs were also in action.

I'll walk out tonight and turn over to Mike Bloomberg a different city than the one that was handed to me

Outgoing Mayor Rudolph Giuliani

In the tightest security operation ever mounted for the event, 7,000 police officers and 200 FBI agents were deployed. Some officers were kitted out with equipment to test the air for chemical contamination, and others had radioactivity detectors in the unlikely event that someone might try to smuggle a nuclear weapon into the event.

All post-boxes, rubbish bins and news stands had been removed from the square, and manhole covers were sealed shut.

Revellers had been told to leave their alcohol at home.

The World Trade Center site is now almost cleared

Mr Giuliani leaves office, despite the wave of popularity he has been riding since 11 September, because he is barred by law from running for a third consecutive term as mayor.

"I think I'll walk out tonight and turn over to Mike Bloomberg a different city than the one that was handed to me," he said before the midnight celebrations.

Prior to 11 September, Mr Giuliani had made his name with his controversial "zero tolerance" fight against crime - a policy which saw the steepest drop in crime in decades but was also blamed for heightening racial tensions in the city.

At his final news conference, before the traditional ceremony which saw the outgoing mayor leave City Hall to the sound of bagpipes, Mr Giuliani said:

"The achievement I'm the proudest of for my administration is restoring the spirit of the city, making people believe in being New Yorkers again."