"We are breaking off relations because of the political terrorism being carried out by the government of Alvaro Uribe, not because of the Colombian people," Ortega said, referring to the Colombian president.
Nicaragua has a long-standing maritime boundary dispute with Colombia and Ortega is a strong ally of Venezuelan President Hugo Chavez and Correa.
Chavez, who has spoken out vociferously against the Colombian raid, recalled the Colombian ambassador to Venezuela earlier this week but did not fully sever diplomatic relations.
Ortega, whose earlier Sandinista government battled U.S.-backed Contra forces in the 1980s, promised to maintain friendly relations with the U.S. when he was elected in 2006.
Nicaragua will not renew relations with Colombia until it complies with parts of a decision of the International Court of Justice in The Hague, Netherlands, that favor Nicaragua in the maritime dispute, Ortega said.
In December, the court rejected Nicaragua's claims to three disputed Caribbean islands, but left open the chance Nicaragua might win rights to other islands in the chain and recognition of some of the sea it claims.
Ortega said Colombia also must promise to "not again commit terrorist acts like the one it has launched against Ecuador."