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A letter of credence is a formal letter sent by one head of state to another head of state that formally grants diplomatic accreditation to a named individual (usually but not always a diplomat) to be their ambassador in the country of the head of state receiving the letter. A letter of recall is the opposite, a letter sent from one head of state to another head of state recalling an ambassador, either as a means of diplomatic protest (see letter of protest) or because the diplomat is being reassigned elsewhere and is being replaced by another envoy.

In parliamentary democracies, heads of state accept or reject letters of credence on the basis of advice (that is, instructions from the government which put the head of state under obligation) from their state's government. In reality, however, they are almost invariably accepted, as both states will have informally discussed the issue prior to the formal ceremony. If a problem were to arise, it would be sorted out in these earlier government to government contacts.

Letters of credence are the most formal form of exchange between states short of state visits, with formal modes of address such as titles and styles being used. This may be significant; for example, when Italy deposed the Haile Selassie of Abyssinia (Ethiopia) and claimed the King of Italy (Victor Emmanuel III) to be the Abyssinian emperor also, not all states recognized this claim (see diplomatic recognition), and some letters of credence were addressed to the "King of Italy and Emperor of Abyssinia," others to the "King of Italy." King George VI, as King of the United Kingdom of Great Britain and Northern Ireland, addressed his letters of credence to the "King of Italy"; however, as King of Ireland, on the advice of the Irish government of Éamon de Valera, he addressed his letters of credence to the "King of Italy and Emperor of Abyssinia," because the Irish Free State, unlike the United Kingdom, recognized the King of Italy's imperial title.

Another dispute revolved around the titles of the British and Irish heads of state. Britain took the title President of Ireland to imply a claim to all of Ireland (not just the the Republic of Ireland but also Northern Ireland, which is part of the UK). As a result, on the advice of Her Majesty's Government, Queen Elizabeth II formally addresses letters of credence to the Irish president by name (e.g., "President Robinson," "President McAleese," etc.). This compromise was agreed to by the governments of both states.

Until a head of state formally accepts a letter of credence, an ambassador-designate does not formally assume diplomatic status, including the possession of diplomatic immunity. In many states, a minister in the government or in cabinet will attend (that is, be present with) the head of state at the actual ceremony, to symbolize the fact that the acceptance or rejection of the letter of credence is on the basis of government advice.

Given that a head of state sends a letter of credence to a fellow head of state, the corollary is true also. The person who sends a letter of credence is by implication a head of state (unless they are acting as the representative or designate of a head of state; for example, a governor-general). This became a source of dispute in Éire from December 1936 to the declaration of the Republic of Ireland in 1949, when from 1937 to 1949 Ireland had both a President of Ireland and King George VI, who had been proclaimed King of Ireland. Given that under the External Relations Act the role of representing Ireland in the accreditation of ambassadors belonged to the King of Ireland on the advice of the Irish government, between those years the Irish head of state was unambiguously the King of Ireland. After April 1949, when that role was given by law to the President of Ireland, the President became Irish head of state.

In 2005, Canada changed its Letter of Credence and Letter of Recall by removing all references to Elizabeth II as Queen of Canada, Canada's head of state, instead having them run in the name of the Governor General, who is the Queen's representative. Australia and New Zealand have since followed suit, in consultation with Elizabeth's Private Secretary. There is currently a movement to reverse these decisions by the Monarchist League of Canada.