US forces agreed to a truce offered by Iraqi cleric Moqtada al-Sadr in the holy city of Najaf today, suspending their attacks and allowing Sadr's Mehdi Army fighters to pull out of the city.
Ending a day of uncertainty following the ceasefire offer, a spokesman for the US-led coalition in Iraq said the Americans would pull back to bases but continue patrols in the city until Iraqi police and other local forces could ensure security.
But US officials were resisting a condition from Sadr that an arrest warrant on a murder charge against him be suspended.
"We are cautiously optimistic. This is a good first step," coalition spokesman Mr Dan Senor told a news conference.
"As soon as the Iraqi security forces have assumed responsibility for public security and re-established law and order, coalition forces will reposition to their bases outside Najaf , while maintaining protective units at the CPA (coalition) offices and the governorate building and Iraqi police stations.
"Until that time coalition forces will suspend offensive operations but will continue to provide security by carrying out presence patrols.
Throughout the process coalition forces will retain the inherent right to self-defence." A deal with the radical young preacher could staunch a major source of trouble for US troops as Washington prepares to hand over to an Iraqi interim government on June 30.
It remains to be seen if the truce marks the end of Sadr's ambitions or rather a bid to survive and keep his forces intact to influence the course of Iraqi politics after the occupation.
US commanders have rejected previous ceasefires and demand that he give himself up for arrest and disband his guerrillas.