Officials said the fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar.
The devaluation had been widely expected by analysts in recent months, though experts had been unsure about whether the government would act while President Hugo Chavez remained out of sight in Cuba recovering from cancer surgery.
It was the first devaluation to be announced by Chavez's government since 2010, and it pushed up the price of the dollar against the bolivar by 46.5 per cent.
By boosting the bolivar value of Venezuela's dollar-denominated oil sales, the change is expected to help ease a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations.
But analysts said the move would not be sufficient to end the government's budget woes or balance the exchange rate with an overvalued currency. Economists predicted higher inflation and a likely continuation of shortages of some staple foods, such as cornmeal, chicken and sugar.
Planning and Finance Minister Jorge Giordani said the new rate will take effect Wednesday, after the two-day holiday of Carnival. He said the old rate would still be allowed for some transactions that already were approved by the state currency agency.
Venezuela's government has had strict currency exchange controls since 2003 and maintains a fixed, government-set exchange rate. Under the controls, people and businesses must apply to a government currency agency to receive dollars at the official rate to import goods, pay for travel or cover other obligations.
While those controls have restricted the amounts of dollars available at the official rate, an illegal black market has flourished and the value of the bolivar has recently been eroding. In black market street trading, dollars have recently been selling for more than four times the official exchange rate of 4.30 bolivars to the dollar.
Economist Pedro Palma, a professor at Caracas' IESA business school, said the government's decision to allow some previously requested dollar transactions for products in categories such as food, health care, construction and autos will somewhat soften the impact on inflation. But he predicted the devaluation would inevitably further drive up inflation.
Economist Jose Guerra told The Associated Press that given the devaluation, he predicts inflation of more than 25 per cent this year.
The announcement of the devaluation came after the country's Central Bank said annual inflation rose to 22.2 per cent in January, up from 20.1 per cent at the end of 2012.
The oil-exporting country, a member of OPEC, has consistently had Latin America's highest officially acknowledged inflation rates in recent years. Spiraling prices have come amid worsening shortages of some foods.
Seeking to confront such shortages, the government last week announced plans to have the state oil company turn over more of its earnings in dollars to the Central Bank while reducing the amount injected into a fund used for various government programs and public works projects.
It was the fifth time that Chavez's government has devalued the currency since establishing the currency exchange controls a decade ago in an attempt to combat capital flight.
Giordani said the government also decided to do away with a second-tier rate that has hovered around 5.30 bolivars to the dollar, through a bond market administered by the Central Bank.
That rate had been granted to some businesses that hadn't been able to obtain dollars at the official rate, and accounted for roughly one-fifth of government-approved foreign currency transactions.
Central Bank President Nelson Merentes called that bond trading system, known by the acronym Sitme, "imperfect."
"It doesn't make much sense to keep a system that seeks the country's debt to feed it," Merentes said.
Palma said it's worrying that the government is not providing any additional outlet for Venezuelans to obtain dollars, given the strong demand for foreign currency. Guerra, a professor at Central University of Venezuela, predicts that demand for dollars is likely to keep pushing the so-called "parallel" dollar market higher.
The government's announcement drew strong criticism from opposition leader Henrique Capriles, who said that the government's heavy spending was to blame for the situation and that officials were trying to slip the change past the public at the start of a long holiday weekend.
"They spent the money on campaigning, corruption, gifts abroad!" Capriles said in one of several messages on his Twitter account. Capriles was defeated by Chavez in an October presidential vote that was preceded by a burst of heavy government spending.
Capriles criticized Vice-President Nicolas Maduro's handling of the situation. Maduro, who was named by Chavez as his preferred successor before undergoing cancer surgery Dec. 11, has taken on more responsibilities and a higher profile during the president's nearly two-month absence.
"They give Mr. Maduro a little more time in charge and he finishes with the country," Capriles said. "Look at the inflation in January, and now the devaluation."
Maduro said on television that the measure had been approved by Chavez. He said the change was necessary in response to a recent "speculative attacks" against the country's currency.
Associated Press writer Jorge Rueda contributed to this report.Suggest a correction