The Bush administration has decided to take the unusual step of bestowing on its own troops and personnel immunity from prosecution by Iraqi courts for killing Iraqis or destroying local property after the occupation ends and political power is transferred to an interim Iraqi government, U.S. officials said.

The administration plans to accomplish that step -- which would bypass the most contentious remaining issue before the transfer of power -- by extending an order that has been in place during the year-long occupation of Iraq. Order 17 gives all foreign personnel in the U.S.-led Coalition Provisional Authority immunity from "local criminal, civil and administrative jurisdiction and from any form of arrest or detention other than by persons acting on behalf of their parent states."

U.S. administrator L. Paul Bremer is expected to extend Order 17 as one of his last acts before shutting down the occupation next week, U.S. officials said. The order is expected to last an additional six or seven months, until the first national elections are held.

The United States would draw legal authority from Iraq's Transitional Administrative Law and the recent U.N. resolution recognizing the new government and approving a multinational force, but some U.S. officials and countries in the multinational force still want greater reassurances on immunity, U.S. officials said.

Bush's top foreign policy advisers, including Defense Secretary Donald H. Rumsfeld, Secretary of State Colin L. Powell and national security adviser Condoleezza Rice, are still debating the scope of immunity to be granted. "The debate is on the extent or parameters of coverage -- should it be sweeping, as it is now, or more limited," said a senior U.S. official familiar with discussions, speaking anonymously because of the sensitivity of the issue.

In Baghdad, U.S. officials have been engaged all week with interim Prime Minister Ayad Allawi and national security adviser Mowaffak Rubaie. Both sides hope to finalize the terms before Bush leaves for the NATO summit in Istanbul at week's end, U.S. and Iraqi officials said.

The administration is taking the step in an effort to prevent the new Iraqi government from having to grant a blanket waiver as one of its first acts, which could undermine its credibility just as it assumes power. But U.S. officials said Washington's act could also create the impression that the United States is not turning over full sovereignty -- and giving itself special privileges.

The administration's move comes when issues of immunity are particularly sensitive, in light of the scandal over the abuse of U.S. detainees in Iraq and Afghanistan. Yesterday at the United Nations, the administration, citing opposition on the Security Council, withdrew a resolution that would have extended immunity for U.S. personnel in U.N.-approved peacekeeping missions from prosecution before the International Criminal Court.

In Iraq, U.S. officials are already concerned about the potential fallout after June 30 among key players -- from Grand Ayatollah Ali Sistani, Iraq's most powerful religious cleric, to militant insurgents. But the Bush foreign policy team concluded that there are few alternatives until elections select a government that will be powerful enough to negotiate a formal treaty, U.S. officials said.

The issue of immunity for U.S. troops is among the most contentious in the Islamic world, where it has galvanized public opinion against the United States in the past. A similar grant of immunity to U.S. troops in Iran during the Johnson administration in the 1960s led to the rise of Ayatollah Ruhollah Khomeini, who used the issue to charge that the shah had sold out the Iranian people.

"Our honor has been trampled underfoot; the dignity of Iran has been destroyed," Khomeini said in a famous 1964 speech that led to his detention and then expulsion from Iran. The measure "reduced the Iranian people to a level lower than that of an American dog."

Ironically, Khomeini went into exile in Iraq, where he spent 12 years in Najaf -- the Shiite holy city that is now home to Sistani and his followers and where Iraqis still remember the flap that led the shah to deport a cleric who later led Iran's 1979 Islamic revolution.

In Iraq, Washington had originally hoped to achieve a formal Status of Forces Agreement to grant immunity, but that was effectively vetoed when Sistani and other Iraqi politicians said no unelected Iraqi government could enter into a treaty with other countries. The United States now hopes to negotiate a status agreement next year, after a government is elected.

In the current negotiations over Order 17, a senior Iraqi official said, the basic concept is to cover "soldiers and foreign nationals working in operations conducted by mutual consent or understanding with the Iraqi interim government and the command of the multinational force. But what that means remains to be seen."

The United States hopes to include some foreign contractors, many of whom are engaged in security operations, the Iraqi official added, while Iraq is pressing to retain sovereignty.

"It's going to be a political hot potato, and we're worried it'll be used as a hot potato in a way that is not good for either the interim government or the multinational force," the official said.

As a legal basis, Iraq's transitional law, which was worked out between Bremer and the now-disbanded Iraqi Governing Council, may be considered too weak a foundation for granting immunity. Sistani argued against it because it was not the work of elected officials.

The U.N. resolution also has no direct reference to immunity for foreign troops. The only reference is in a letter from Powell to the Security Council attached to the resolution, which says contributing states in the multinational force must "have responsibility for exercising jurisdiction over their personnel" but does not mention prosecution or other specific activity.

Staff writer Thomas E. Ricks contributed to this report.