After seven weeks of bitter fighting, U.S. officials said Thursday they will suspend offensive military operations against the Mahdi militia of Shiite cleric Moqtada Sadr around the holy city of Najaf and reposition U.S. troops there.

In return, Sadr has said his militia will end what he called "armed demonstrations" against the U.S. occupation and allow Iraqi security forces to police the city unhindered. He also said he would hold "broad talks" with Shiite leaders on the future of his army and on the charges brought against him and his allies for the murder of a moderate Shiite cleric last year.

If the agreement holds, it would be a major development on the road to the scheduled handover of limited authority to an Iraqi government on June 30.

Sadr did not agree to turn himself in for prosecution or to dissolve his militia, as the United States has demanded.

The deal was brokered by leading Iraqi Shiites, most prominently by Iraq's U.S.-appointed national security adviser, Mowaffak Rubaie, without actual U.S. contact with Sadr, officials said. Rubaie obtained a "truce offer" from Sadr, which he brought to the U.S.-led Coalition Provisional Authority.

The authority, in turn, tacitly but publicly approved the understanding Thursday afternoon in Baghdad, said Dan Senor, the authority's spokesman, who hedged his language carefully to avoid the word "agreement."

"We were aware discussions were going on," said Senor. A letter from Sadr "was issued. We responded. We respect the process that has been launched. We are going to be responsive. The letter talks about forces withdrawing and we are going to be responsive." He called it a "first step, a positive step."

As there was no direct negotiation or one-to-one agreement, U.S. officials managed to formally stick to their vow that they would not negotiate with Sadr or make a deal with him that did not involve his surrender and dissolution of his army.

The arrangement applies to Najaf and nearby Kufa. It was unclear Thursday to what extent the day's agreements applied to other cities, including Baghdad and Karbala, where U.S. troops have clashed with Sadr's forces.

Brig. Gen. Mark Kimmitt, deputy commander of U.S. forces in Iraq, compared the development Thursday to the agreement earlier this month that brought relative quiet to the Sunni city of Fallujah, where U.S. Marines had engaged in ferocious combat with insurgents through March and April.

The Fallujah cease-fire "has held since May 3," Kimmitt said. "We're hoping to see the same thing in Najaf."

A negotiated end to the rebellion would be a major step toward pacifying the south, home to most of Iraq's majority Shiite population. U.S. forces also are fighting a Sunni Muslim rebellion in central and western Iraq.

If the deal works, it would also go a long way toward affirming the willingness of mainstream Shiite political parties and religious leaders to cooperate with the coming transfer of power. Shiite leaders view elections scheduled for next January as a vehicle for coming to power for the first time in Iraq's history.

U.S. and Iraqi officials want to arrest Sadr for the murder last year of moderate Shiite cleric, Abdel Majid Khoie.

Since early April, Sadr's militia has been engaged in regular hit-and-run battles with U.S. and Iraqi forces in the Najaf and Karbala areas in the south as well as in Sadr's stronghold in a section of Baghdad, Sadr City.

U.S. officials as well as Shiite leaders took the lack of fighting in Najaf overnight and during the day as evidence that the agreement was working, at least for the moment.

"Last night, the citizens of Najaf slept soundly for the first time in many weeks," Rubaie said.

As for Sadr keeping his word, Rubaie declared, "We sensed a strong will last night to get a peaceful settlement." Sadr, he said, signed off on his pledge to withdraw his forces at 3 a.m. (7 p.m. EDT) after intensive talks with Shiite members of the U.S.-appointed Governing Council, on which Rubaie is a representative.

Muhammed Mussawi, leader of the Shiite Islamic Organization Party, one of several groups that have been negotiating with the insurgent leader said, "We agreed to a truce."

U.S. military commanders have been waging a war of attrition on Sadr's forces, inflicting casualties in several cities across the south and in Baghdad's Sadr City slum. They have also captured several Sadr aides, including his brother-in-law, in raids in Najaf, Kufa, Baghdad and Kirkuk.

Nonetheless, U.S. officials have said repeatedly that it was up to Shiite leaders to find a negotiated solution.

In the letter to Rubaie, Sadr said it was his goal "to put an end to the tragic situation in the noble city of Najaf and to the violations to the sanctity of the shrine of Imam Ali" and other holy places there.

To that end, he said he agreed to:

* A cessation of "armed demonstrations and the occupation of government buildings, offices and institutions . . ."

* The withdrawal from Najaf of all Mahdi army fighters "who are not from Najaf province . . ."

* An end to Mahdi army Islamic courts.

* Allow "the police and other Iraqi forces to perform their mission of providing security and order, and not allowing anyone to hinder them in that mission."

Sadr's letter said it was his understanding that the United States would withdraw "occupation forces" to their bases, "with the exception of small units protecting their headquarters" and government buildings.

The United States, said the letter, will also engage in "broad talks with representatives of the Shiite establishment on the future" of the Mahdi army and "the court cases and that no steps will be taken until that time."

At Thursday's daily briefing in Baghdad, Senor responded.

"We are hopeful" that Sadr "will live up to the commitments he made in this letter," said Senor. If he does, "we will play our part."

"Successful implementation of these commitments will permit the people of Najaf governate, who have been terrorized by Moqtada's militia, to resume their normal lives. It will also permit the safe resumption of pilgrimage to the shrine of Imam Ali and the removal of further danger to that shrine by parties seeking to inflame the population.

"As soon as the Iraqi security forces have assumed responsibility for public security and reestablish law and order," Senor said, "coalition forces will reposition to their bases outside Najaf, while maintaining protective units" at official buildings such as police stations.

"Until that time," he said, "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 of self-defense."

Senor said the United States has not "altered our position with regard to the need to dissolve and disarm Moqtada's militia throughout Iraq" or with Sadr's "obligation to meet the requirements in the arrest warrant issued to him," he said.

Barbash reported from Washington.