Iraqi leaders are examining a new draft deal under which US troops would remain in the country after the UN mandate expires later this year, officials say.
The two sides have for months been working on an agreement which will also set a deadline for a US withdrawal.
The latest draft requires troops to pull out by June 2011 unless invited to stay by Iraqi leaders, officials said.
It would also allow Iraqi courts to try US soldiers accused of serious crimes committed while off-duty in Iraq.
Government spokesman Ali al-Dabbagh told Reuters news agency US troops would withdraw over three years.
“In 2011, the government at that time will determine whether it needs a new pact or not, and what type of pact will depend on the challenges it faces,” he said.
Mr Dabbagh said the draft also addressed the issue of immunity for US forces serving – until now a major sticking point in the agreement.
“Inside their bases, they will be under American law. Iraqi judicial law will be implemented in case these forces commit a serious and deliberate felony outside their military bases and when off duty.”
The draft must be approved by Iraqi political leaders, parliament and the cabinet.
The UN mandate for coalition forces to remain in the country is due to expire on 31 December 2008.