Theresa May has said the UK "cannot possibly" remain within the European single market, as staying in it would mean "not leaving the EU at all".
But the prime minister promised to push for the "freest possible trade" with European countries and to sign new deals with others around the world.
She also announced Parliament would get to vote on the final deal agreed between the UK and the EU.
But Labour warned of "enormous dangers" in the prime minister's plans.
Mrs May used her much-anticipated speech to announce her priorities for Brexit negotiations, including maintaining the common travel area between the UK and Irish Republic and "control" of migration between the UK and the EU.
Mrs May said there would not be a "blow-by-blow" account of negotiations, set to begin after Article 50 of the Lisbon Treaty is invoked by the end of March.
It was not her intention to "undermine" the EU or the single market, she added, but she warned against a "punitive" reaction to Brexit, as it would bring "calamitous self-harm for the countries of Europe and it would not be the act of a friend".
She added: "I am equally clear that no deal for Britain is better than a bad deal for Britain."
Analysis
By Laura Kuenssberg, BBC political editor
Since the referendum she and her ministers have simply refused to be so explicit.
For months some ministers have privately whispered about complex solutions that might keep elements of membership, the choices not being binary, mechanisms that might give a sort of membership with a different name.
Well, no more. The simple and clear message from Theresa May's speech this morning is that we are out.
The prime minister had some strong words of advice for the EU and its treatment of member states, arguing it could "hold things together by force, tightening a vice-like grip that ends up crushing into tiny pieces the very things you want to protect" or "respect difference, cherish it even".
But the most keenly awaited part of the speech dealt with the UK's post-Brexit trading relationship with the rest of Europe.
Any agreement with the EU must "allow for the freest possible trade in goods and services", Mrs May said. "But I want to be clear: what I am proposing cannot mean membership of the single market.
"It would, to all intents and purposes, mean not leaving the EU at all. That is why both sides in the referendum campaign made it clear that a vote to leave the EU would be a vote to leave the single market."
EU leaders have warned that the UK cannot "cherry-pick" access to the single market - which allows the free movement of goods, services and workers between its members - while at the same time restricting the free movement of people.
Mrs May said the UK wanted to "continue to attract the brightest and the best to work or study" in Britain, but immigration policy had to be "managed properly" to serve "the national interest".
She added: "So we will get control of the number of people coming to Britain from the EU."
And Mrs May indicated the UK's relationship with the EU's customs union - whose members do not impose tariffs on each other's goods and impose the same tariffs on goods from outside - would change.
She said she did not want the country to be "bound" by the shared external tariffs. The UK would instead be "striking our own comprehensive trade agreements with other countries". This could mean becoming an "associate member" of the customs union, signing up to some parts only, or reaching a "completely new" agreement.
The UK's "vast contributions" to the EU would also end, she added.
Addressing an audience including senior ministers and foreign ambassadors in central London, Mrs May said the UK had "voted for a brighter future for our country" and would become "stronger, fairer, more united" after Brexit. She said the country had always been "profoundly internationalist" and would remain so.
To the 27 other EU member states, she said: "We will continue to be reliable partners, willing allies and close friends. We want to buy your goods, sell you ours, trade with you as freely as possible, and work with one another to make sure we are all safer, more secure and more prosperous through continued friendship."
Mrs May, who backed Remain in the referendum, called for a "new and equal partnership" with the EU, "not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out".
"We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave."
People voting for Brexit had done so "with their eyes open", the prime minister said, and the country was "coming together" after the referendum, adding: "Now we need to put an end to the division and the language associated with it - Leaver and Remainer and all the accompanying insults - and unite to make a success of Brexit and build a truly global Britain."
But Labour leader Jeremy Corbyn urged the prime minister to "be clearer" about her long-term objectives, arguing that she she wanted to "have her cake and eat it" over the single market.
He added: "I think we have to have a deal that ensures we have access to the market - we have British jobs dependent on that market - that's what we'll be pushing for."
Mr Corbyn also said: "There are enormous dangers in all of this and when she talks about future trade arrangements, all she said was that Donald Trump said we'd be first in the queue - first in the queue for an investor protection-type treaty? I don't know exactly what she has in mind on that."
UK voters opted for Brexit in last June's referendum by 51.9% to 48.1%.
After Mrs May's speech Liberal Democrat leader Tim Farron said: "Hard Brexit was never on the ballot paper. Ripping us out of the single market was not something proposed to the British people. This is a theft of democracy."
UKIP leader Paul Nuttall said he feared a "slow-motion Brexit", adding: "We want this done quickly. We want a clean break with the European Union, a free trade deal, and then we can get on as a free, independent nation."
Scottish First Minister Nicola Sturgeon claimed leaving the single market would be "economically catastrophic". She hinted at a second independence referendum, saying Scotland - which voted against Brexit - should have "the ability to choose between that and a different future".
In a statement, the Irish government said the UK's "approach is now firmly that of a country which will have left the EU but which seeks to negotiate a new, close relationship with it". It added it was "acutely aware of the potential risks and challenges for the Irish economy" but also of "the potential economic opportunities that may arise".
Michel Barnier, the European Commision's chief Brexit negotiator, tweeted: "Ready as soon as UK is. Only notification (that is, invoking Article 50) can kick off negotiations."
Earlier, German Chancellor Angela Merkel urged the business community in her country to back her stance on Brexit, saying: "I'm asking you as representatives of the business world to act together with us, because should it become apparent that you can get full access to the single market even if you can choose certain things then we risk that every country cherry picks. That's why politics and business need to act together."
BBC
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