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Naturalization is the process of applying for U.S. citizenship. A citizen who obtained U.S. citizenship by going through this process rather than birth in the U.S. is said to be “Naturalized.”

No. There are waiting periods which depend upon how an individual first obtained permanent residence: three years for a foreign national who obtained permanent residence based on marriage to a U.S. Citizen (if they still live “in marital union” with that citizen), five years for foreign nationals who obtained permanent residence through any other method.

Yes. Not everyone who has a green card is eligible for citizenship. The requirements include:
The applicant must be 18 years old at time of application for Naturalization;
The applicant must be Admitted to Legal Permanent Resident status;
The applicant must have maintained his or her residence in the state from which the naturalization application is filed for at least three months prior to the filing;
The applicant must have maintained continuous residence in the United States for the past three years if permanent residence was based on marriage to a U.S. citizen, or for the past five years if the permanent residence application was based on employment or a non-U.S. citizen spouse family-based application. This does not necessarily mean that the person must have been physically present in the U.S. continuously during the relevant period, but instead means that they were primarily living in the United States with the intent at all times to remain a Legal Permanent Resident of the U.S. during the past three or five years. For U.S. citizen marriage cases where only three years of permanent residence is required, the potential naturalization applicant must have been living “in marital union” up to date of interview with no divorce or separation (even informal).
Regardless of the basis for the original grant of permanent residence, it is critical that there have been no single absence from the United States for more than one year at a time (in many case, six months).
Even after the naturalization application is filed, the applicant must maintain continuous residence (as described above) from the time of filing of the naturalization application through to the time that naturalization is granted – in other words, for the whole time that the application process is ongoing.
Apart from the continuous residence requirements, the applicant must have maintained actual physical presence in US for half the required continuous presence time (one and a half years for those whose permanent residence applications were based upon marriage to a U.S. citizen, two and a half years for those whose permanent residence applications were based upon any other type of application);
The applicant must have the ability to read, write and speak ordinary English (there are exceptions to this requirement: physical, mental or developmental impairment or certain combinations of age and length of permanent residence status).
The applicant must demonstrate knowledge and understanding of the history and government of the US. The only exemptions to this requirement are for a physical, mental or developmental impairment. Everyone not subject to a physical disability or a mental/developmental impairment must satisfy this requirement; and
There is a requirement of “Good Moral Character” – this is an extremely complex issue with its own significant body of law; many things which may not be issues for permanent residence may yet be problematic here. A detailed analysis by an attorney is critical.

An application is filed with US Citizenship and Immigration Services. Soon after, a Biometrics appointment is arranged to capture fingerprints and a photo of the applicant. A background check is performed based upon this information and the information in the application. An interview is conducted for naturalization cases – the applicant will ordinarily be tested both on the English language requirements and on understanding of US history and government. The applicant will be questioned on the content of the application as well – including timelines indicated by residence and work history (departure from a job that formed the basis of the original permanent residence case immediately after the green card was granted may raise issues of fraud – as may separation or divorce immediately after a marriage-based application). If the officer determines the case is approvable, the next step is an oath ceremony where the individual swears the citizenship oath obtains the Naturalization Certificate. At this point the applicant becomes a naturalized US citizen and can vote, apply for a US passport, and enjoy the other benefits of US citizenship.

There are cases where individuals in certain situations can get citizenship without going through Naturalization. Some people may automatically be deemed to be US citizens by operation of law. In many cases, for instance, children born overseas to U.S. citizen parents are citizens. This often depends on the date and circumstances of their birth, whether one or both parents were US citizens, number of years the parent spent in the US and at what point in their lives, and various other factors. There are various other situations, although rare, where various laws bestow U.S. citizenship on individuals automatically. Of course, the most obvious and common way to obtain US citizenship by operation of law is simply to be born in the US (though even this doesn’t apply to everyone).