The U.S. has succeeded in convincing Iraq's most powerful anti-Saddam groups to take steps toward democracy.

Later this month, a governing council will be established in Iraq to help run things nationwide. This will involve Iraqis, and, on Tuesday, some formerly anti-Saddam political groupings said they would back this governing body and be part of it, Fox News has learned.

Meanwhile, the U.S. has helped to create two city councils in Iraq and an initial economic agenda for the country.

The councils -- one in the southern Shiite city of Najaf (search) and the other in chaotic Baghdad (search) -- are expected to act as a proving ground for national leaders as the United States tries to set up the framework for the country's transition.

They join other municipal governments with limited powers emerging around Iraq.

In the Iraqi capital Monday, a polyglot city council met for the first time, bringing together a wide range of members -- from tribal leaders in headdresses to women in smart business suits. The role of the 37-member advisory body -- which has no spending authority -- is to advise the U.S.-led administration.

"It's probably the most important day since April 9th, when the coalition came and liberated you from the dictatorship of Saddam Hussein," said L. Paul Bremer, the top U.S. official in Iraq. "Today marks the resumption of the democratic system in Baghdad, which hasn't been here in 30 years."

The U.S. administration screened council members for ties to Saddam's Baath party and nullified the election of "four or five" Baathists, said Army Lt. Col. Joe Rice, a council adviser.

Once the country's constitution is written and a census and voter registrations are finished, nationwide elections will be held, "at which point the coalition's work will be done," Bremer said.

City councils have been emerging around Iraq, with councils in Mosul and Basra, among other cities. Fallujah and other cities have mayors.

On Monday, a 22-member city council took its seats in Najaf. The council's only female member, Dr. Jenan Yasser al-Obeidi, dressed from head to toe in black, sat quietly and took notes during the session.

The U.S.-led administration has also announced an initial economic agenda for Iraq, including establishment of an independent Iraqi central bank and plans to rid the country of bank notes bearing the image of Saddam.

In a national television address, Bremer said Saddam-free dinar notes will enter circulation Oct. 15, and will be swapped one-for-one until the Saddam-faced notes are out of circulation by early 2004. The new bills will be based on a design used in Iraq before Saddam's 1990 invasion of Kuwait, and they do not feature Saddam's face.

But warfare continues in Iraq. Insurgents fired mortar rounds Monday night at a U.S. supply base north of Baghdad (search), and American forces arrested at least 12 Iraqi suspects in a counterattack, the U.S. military said Tuesday. There were no reported casualties.

The mortar attack occurred at a base near Balad (search), 55 miles north of the capital, said Spc. Nicole Thompson (search), a spokeswoman for the U.S. military in Baghdad. She said U.S. forces subsequently caught 12 of the suspected attackers.

Meanwhile, witnesses said a U.S. military vehicle was attacked early Tuesday morning in Baghdad. U.S. military personnel surrounded the area, and an Associated Press photographer saw the charred spot of earth where the attack occurred. The U.S. military said it had no immediate information about the incident.

The violence came after a deadly 24-hour period that saw three U.S. troops killed in Baghdad.

In the latest slayings of U.S. troops, a roadside bomb killed one soldier traveling in an Army convoy Monday, and a second American was shot to death in a Sunday night gunbattle in the troubled Sunni Muslim neighborhood of Azamiyah, the military said. Both soldiers belonged to the Army's 1st Armored Division, the Germany-based unit occupying Baghdad.

Also Sunday, a U.S. soldier was shot and killed drinking a soda in the shade at Baghdad University.

A British soldier was wounded in a sniper attack in Basra, southern Iraq, while on patrol Sunday night, the Ministry of Defense said Monday. The soldier was in stable condition at a British army field hospital where he was being treated for gunshot wounds in a leg, the British government said.

Six British soldiers were killed June 24 in the southern Shiite town of Majar al-Kabir, 180 miles south of Baghdad.

Despite increasing attacks against Americans, no extra troops are needed in Iraq now, the war's retiring commander, Gen. Tommy Franks, said in a TV interview Monday, his last day in uniform.

In Florida, U.S. Central Command officially changed leaders in a ceremony Monday, with Arabic speaker Gen. John Abizaid taking over for Franks. Abizaid is a Lebanese-American who was one of Frank's two deputies at Central Command.

There now are some 145,000 Americans and 12,000 coalition forces including British, Poles and others in Iraq. Up to 20,000 international soldiers will flow into Iraq to help, beginning later this month and concluding with deployments at the end of September, the Pentagon has said.

The Associated Press contributed to this report.