An extremist Shiite group believed to be responsible for kidnapping of five Britons and killing five American soldiers has agreed to renounce violence, the Iraqi government said.
The deal was reached during a weekend meeting between prime minister Nouri Maliki and representatives of Asaib Ahl al-Haq, or League of the Righteous, a group the US says is backed by Iran and refuses to abide by a militia ceasefire.
The group promised to lay down its weapons and join the political process, according to government aide Sami al-Askari, who was at the meeting.
In return, Mr Maliki promised to seek the release of the detainees in US custody, Mr al-Askari said.
The British hostages were captured two years ago in a raid on Iraq's finance ministry that was blamed on the group.
The bodies of two of the kidnapped contractors were found and returned to the UK earlier this summer and Britain said last week that two others were feared dead. The IT consultant the contractors had been guarding, Peter Moore, is believed to be alive.
The deal comes as the Shiite-led Iraqi government moves increasingly to assert its sovereignty and solidify its power base before national elections in January.
The US military has also seen its influence wane as it begins to pull back its troops with plans for a full withdrawal by the end of 2011.
The transformation of the remaining Shiite militant groups into political organisations would be a significant development for Iraq as it prepares for the end of the US military role. It also could boost Tehran's leverage in the neighbouring country, although Iran's government denies any links to Shiite extremists in Iraq.
Iraqi politicians with links to the Asaib al-Haq have said the group wants to participate in next year's parliamentary vote, either by fielding its own ticket or backing candidates from other Shiite parties.
Government spokesman Ali al-Dabbagh also confirmed the deal, according to Iraqi state television.
"The delegation of the Asaib Ahl al-Haq group announced its support for the political process, renounced violence and offered support for efforts to achieve national unity," he told reporters.
"Both sides agreed to solve the pending problems, especially the issue of detainees whose hands have not been stained with Iraqis' blood and who have no criminal evidence against them."
Several high-profile Shiite detainees have been released from American custody this summer, including key Asaib al-Haq member Laith al-Khazali in June. He and his still-detained brother, Qais, were accused of organising an attack on a local government headquarters in Karbala that killed five US soldiers on January 20 2007.
The US military has been freeing inmates or transferring them to Iraqi custody as part of a security pact that took effect on January 1.
Al-Khazali's release was widely believed to be part of negotiations for the release of the British hostages.
A ceasefire called by anti-US cleric Muqtada al-Sadr after his forces were routed in American-backed Iraqi government offensives has been a key factor in ebbing the rampant sectarian violence that pushed the country to the brink of civil war.
But Asaib Ahl al-Haq and other Shiite extremist factions broke with al-Sadr, raising fears that the bloodshed could resume.
The group's main liaison with the government, Salam al-Maliki, said only that many issues were discussed.
"The Iraqi government is getting its full sovereignty on Iraqi land, especially after signing the security pact and accelerating the withdrawal of American troops from Iraq," he told state television.
The Shiite militia ceasefire, along with a Sunni revolt against al Qaida in Iraq and a 2007 US troop build-up have led to a sharp decline in attacks nationwide. But a series of recent bombings has raised fears that violence could resurge.
Provincial security official Sheik Efan Saadoun blamed political rivalries for destabilising the situation and said the Americans pulled back too fast. The US military maintains a presence in the region and has said it is ready to help if requested.
"We lack the military and the security power they enjoy in controlling movement at the main security checkpoints in addition to their sophisticated detection instruments," Mr Saadoun said.
"We were extremely dependent on the Americans in this field."