NICOSIA, CYPRUS, AUG. 18 (SATURDAY) -- Iraqi forces began withdrawing from Iran, raising white truce flags as they dismantled front-line fortifications today, the Iranian news agency IRNA reported.

At the same time, 1,000 Iranian prisoners of war, the first released under Iraqi President Saddam Hussein's offer of peace two days ago, were greeted with tears and flowers at Qasr-e Shirin, on the long-closed Baghdad-Tehran highway.

Red Cross officials told Iran to delay a reciprocal release so they could confirm that all the Iraqi prisoners wished to go home. Many Iraqi prisoners joined televised anti-Baghdad demonstrations while in captivity.

Iranian Foreign Minister Ali Akbar Velayati asked the United Nations, which has watched the truce lines since fighting stopped two years ago, to supervise the Iraqi withdrawal. Baghdad says it will take five days.

Field commanders in Ilam, 75 miles southeast of Qasr-e Shirin, told IRNA that Iraqi troops began to withdraw at midnight from strategic heights that overlook the border from the Iranian side.

"Iraqi troops are busy dismantling their positions and packing up their equipment including wooden beams and iron bars," an IRNA correspondent wrote. "White flags -- the emblem of peace -- can be seen instead of the Iraqi ensign atop the hitherto occupied posts."

Iran insisted that Iraq's withdrawal from 1,000 square miles of occupied territory should be the first step in implementing the U.N.-mediated 1988 cease-fire.

Saddam accepted that and other Iranian demands Wednesday, saying he was doing so in order that forces from the Iranian front could move to face the U.S. buildup in Saudi Arabia.