Iraq's interim government says it welcomes a proposal by rebel Shia cleric Moqtada al-Sadr's militia to disarm and added it will meet at least some of the demands made by Sadr.
"The government welcomes the announcement by Sadr that his militia will disband, hand over their weapons, respect the authority and the unity of the state and abide by the rule of law in Iraq," said a statement issued in the name of Mr Kassim Daoud, Iraq's national security adviser and chief negotiator, on Friday.
"Unlike the old regime, this government will abide by its pledges to afford equal and fair treatment to all as well as to offer amnesty to those who have not committed crimes against the Iraqi people," the statement said.
If a deal were to be struck with the Mehdi Army, not just in Sadr City, but in other Shia flashpoints around the country, it could go some way to stabilising the country ahead of elections due in January, although the Sunni-led insurgency remains a severe problem in central and northern Iraq.
The announcement came in response to an offer made by Sadr's top aide in a televised address on Thursday.
In a broadcast on al-Arabiya television, aide Ali Smeism said the militia, known as the Mehdi Army, would disarm if Sadr's aides were freed from US detention, if US forces stopped "persecuting" the Mehdi Army and if reparations were paid.