Interim Prime Minister Ayad Allawi said negotiators on Tuesday hammered out the basis for an agreement to end fighting with followers of radical Shiite Muslim cleric Muqtada al-Sadr.
U.S. forces have been daily attacking the vast Baghdad slum of Sadr City (search) to knock out the cleric's militia and pressure him to lay down his arms in favor of negotiations.
"Fortunately, there are positive signs in some areas. I met with some brothers in Sadr City and we laid the basis for an agreement to end all their armed manifestations and to give up all their arms," Allawi told the National Council, a watchdog over his interim government.
Al-Sadr's militia, known as the Mahdi Army (search), staged an uprising in April, sparking fierce fighting in Sadr City, the southern holy city of Najaf and other areas.
A peace deal was brokered following heavy fighting in Najaf in August, but clashes in Sadr City have continued.
Overnight, U.S. warplanes pounded the slum after an American patrol came under small arms fire, the military said Tuesday. Hospital officials said at least one person was killed in skirmishes between U.S. troops and al-Sadr fighters.
Allawi did not give details on the agreement. Al-Sadr has been under pressure top dissolve the Mahdi Army militia and instead turn his movement into a political party.
Al-Sadr has seesawed about whether he will enter the political arena.
Seemingly contradicting earlier comments by his own spokesman, al-Sadr said in a television interview Monday that he will not participate in elections because "these are American elections, not Iraqi elections. I want free and honest Iraqi elections."
The cleric also called for international supervision of the balloting in an interview with Al-Manar Television of the Shiite extremist group Hezbollah (search).
Al-Sadr also reiterated a call for kidnappers to release two French journalists, Christian Chesnot (search) and Georges Malbrunot (search), who disappeared Aug. 21 in southern Iraq with their Syrian driver.
"France is not one of the occupying countries, and has rejected the occupation. I call for sparing France any harm," he said. "It is not permissible to kidnap someone who is not a participant or supporter of the occupation."