The announcement transitions the current guidance for business from requirements to recommendations, and businesses will have the "ability to continue requiring masks and social distancing."
His order still allows businesses to enforce mask mandates if they want, but cities, towns and counties must lift theirs.
Events of more than 50 people will also no longer need approval from local governments, with the expectation that they continue to follow CDC recommendations for COVID-19 mitigation.
Bars will also be able to "resume normal operations" under the governor's new order.
Arizona Gov. Ducey eased restrictions on businesses in the state.
"Today we are in a different spot, and we are also a lot smarter," Ducey wrote on Twitter. "I’m confident Arizona’s businesses and citizens will continue to act responsibly as we gradually get back to normal."
The governor cited weeks of declining cases, hospitalization rates and how vaccine eligibility has expanded to residents ages 16 and older.
On March 25, Arizona reported 138 additional confirmed COVID-19 cases, the smallest daily increase reported in more than six months.
According to the state’s coronavirus dashboard, the additional cases and the 32 additional deaths reported Thursday increased Arizona’s pandemic totals to 837,907 cases and 16,874 deaths.
The state reported 81 additional cases on Sept. 8 in the trough between last summer’s surge and the worse one over the fall and winter when daily case reports reached as high as 17,000.
Phoenix mayor criticizes governor on changes
Phoenix Mayor Kate Gallego said on Twitter that Ducey's announcement "directly contradicts the best scientists on the field."
"The horrible surge last June was only curbed by masking- when the Governor finally allowed cities to do it," Gallego wrote. "To abandon precautions now is like spiking the ball on the 5-yard line."
Gallego cited new coronavirus variants circulating in Arizona and how the state could see another surge in the future.
"The governor clearly cares a lot less about the people of Arizona than his political future," wrote Gallego.
Comments from Arizona politicians, others on COVID-19 order
"Better late then never. To all the Arizona’s who have suffered so much during this year long shutdown we’re getting there slowly, but surely." — State Sen. Michelle Ugenti-Rita, R-Scottsdale.
"@dougducey is now preventing local leaders from protecting their communities. Virtually everyone agrees that vaccines and masks are crucial to truly ending this pandemic." — Secretary of State Katie Hobbs.
"... the governor has made the right and responsible decision to continue moving Arizona forward and ensure that our economy and our people will again thrive." — Arizona House Speaker Rusty Bowers, R-Mesa.
"Relaxing these guidelines could counteract the great results we have had in the past weeks. I want normalcy but I also want herd immunity from #COVID19." — State Rep. Cesar Chavez, D-Phoenix.
"As we now see objective measures showing clear virus mitigation coupled with the broad availability of the vaccine, it is a welcome sign that the business requirements are transitioning to recommendations." — Chad Heinrich, National Federation of Independent Business state director.
"A downward trend is not synonymous with the elimination of the virus. Now is not the time to become complacent and declare victory when the virus is still prominent throughout our community." — Health System Alliance of Arizona.
"We appreciate what the governor did today in making mask enforcement optional for businesses... The local mandates were a divisive policy without any data to back them up." — State Rep. Joseph Chaplik, R-Scottsdale.
"This exceedingly PREMATURE and will cause BAD OUTCOMES! Haven’t enough Arizonans become INFECTED? Haven’t enough Arizonans become SICK? Haven’t enough Arizonans DIED?" — State Rep. Andrea Dalessandro, D-Green Valley.
"Gov. Ducey’s guidance protects public health and entrusts Arizona businesses and citizens to continue taking the precautions that will keep everyone safe. Thank you, Gov. Ducey, for following the science and getting Arizona back open." — Arizona Senate President Karen Fann, R-Prescott.
"Just days after he blocked a FEMA vaccination POD that could immunize 210,000 Pima County residents, Gov. @dougducey decides to upend local mask laws that protect public health." — Pima County Supervisor Rex Scott.
"Our restaurants know what to do, and Gov. Ducey’s updated guidance will allow them to operate the best way they see fit." — Steve Chucri, Arizona Restaurant Association president and CEO.
"The vaccine is out far and wide, many Arizonans are vaccinated, and COVID numbers are down. We’re ready to carefully lift restrictions and trust Arizonans to make responsible decisions." — Chandler Mayor Kevin Hartke.
Ryan McKenzie, the owner of McKenzie's Midtown Tavern in Phoenix, says while he took down the barriers at the bar top, he will still be operating at 50% capacity.
"I would rather slow play it," said McKenzie. "Just make sure the numbers don't start creeping up and everyone is safe, so we can get out of this."
Continuing coverage of the COVID-19 pandemic:
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The Associated Press contributed to this report.