He spoke as former Northern Ireland secretaries, plus David Trimble and Seamus Mallon, endorsed the Northern Ireland (Appointed Day) Order transferring powers from Westminster to the new assembly.
Mr Mandelson told a hushed chamber: "After 30 years of violence, the people of Northern Ireland can at last look forward to a future of hope and confidence. "For the first time all shades of political opinion in Northern Ireland will have a stake in the future. After a quarter of a century the curtain is coming down on direct rule."
The Northern Ireland Secretary said the IRA had confirmed that it would quickly appoint an authorised representative on weapons decommissioning. "Nobody is being asked to leap in the dark," he insisted. Swift action would follow if any party was to default on the Agreement, he warned.
Andrew Mackay, the Tory Northern Ireland spokesman, pledged his party's support for the order but said they were "bitterly disappointed" no decommissioning had occurred by this stage.
He said the Opposition had "legitimate concerns" about the appointment of Sinn Fein's Martin McGuinness as Education Minister. "We have to be aware there is huge upset and huge, legitimate concern about Martin McGuinness actually being the schools minister, responsible for education in Northern Ireland. He is legally entitled to that position, and that means that he has a great responsibility to very quickly commence decommissioning."
Mr Mallon said: "After 27 years of a torrid life, it is a strange feeling to stand here on the threshold of the end of an era and the beginning of a new. We will make this work because we know the alternative and we owe it to everyone."
Mr Trimble said direct rule had been a "debasement of democracy".
But the Rev Ian Paisley, the Democrat Unionist leader, opposing the order, said: "The law used to prevent criminals from taking office. Now we are passing a law which will put criminals into office."
In the Lords, Lord Mayhew of Twysden, the former Tory Northern Ireland Secretary, said the risks were manageable and justified. "There have been times, and no doubt long periods of time, when that elusive objective [of ending direct rule] seemed very remote indeed. "But now we have an agreement which represents not so much a step as an enormous leap towards that objective."
Lord Merlyn-Rees, the former Labour Secretary of State, added: "There are problems ahead, but this is a great day for Northern Ireland. We must all do our best to help in every possible way."
Lord Laird, a crossbencher who lives in Ulster, praised the "very difficult and courageous decision of David Trimble and his official Unionist party".
"I think it is to the great credit of my party and inspirational leadership of David Trimble that we have got to this position," Lord Laird said.Reuse content