The decision taken by the State Department comes amid mysterious health attacks on 21 US diplomats in Havana, leaving them with dizziness, concussions, hearing loss and other symptoms.
"The decision was made due to Cuba's failure to take appropriate steps to protect our diplomats in accordance with its obligations under the Vienna Convention. This order will ensure equity in our respective diplomatic operations," said Secretary of State Rex Tillerson.
"Until the Government of Cuba can ensure the safety of our diplomats in Cuba, our embassy will be reduced to emergency personnel to minimise the number of diplomats at risk of exposure to harm," Tillerson said.
The cause of the mysterious health attack, which were for the first time reported in August, is still being investigated.
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According to some media reports, the attacks were caused through a sonic device. The State Department is yet to find such a device.
Investigators have been unable to determine who is responsible or what is causing these attacks.
Last month, Tillerson had met his Cuban counterpart Bruno Eduardo Rodriguez Parrilla in Washington. Cuba has denied of having any role in such mysterious attacks and is providing all support to the FBI which is investigating the matter.