Sunni Muslim politicians have dropped their demand to include former members of Saddam Hussein's party in Iraq's new Cabinet in a bid to get more ministries.
The Sunni minority is believed to be the backbone of the insurgency, and many blame the impasse in forming a new government for a resurgence in violence.
The development comes as US Secretary of State Condoleezza Rice is trying to persuade politicians from the Shia majority and their Kurdish allies to wrap up negotiations to form a new government.
As leaders of Iraq's main Shia, Sunni and Kurdish factions continued their backroom wheeling and dealing, Prime Minister-designate Ibrahim al-Jaafari again put off his long-promised Cabinet announcement.
The National Dialogue Council, a coalition of ten Sunni factions, initially requested 16 Cabinet seats. It submitted a list of candidates on Sunday that included former members of Saddam's Baath party, said a senior member of al-Jaafari's United Iraqi Alliance. But when that was rejected, they dropped the demand, he told reporters.
Alliance members, who control 148 seats in the 275-member National Assembly, refuse to give any top posts to members of the party that carried out Saddam's brutal suppression of the Shiites and Kurds.
The issue is just one of many obstacles that have bogged down talks since the January parliamentary elections. Most Sunnis either boycotted the vote or stayed away for fear of being attacked.
AP