The United States transferred political authority to an interim Iraqi government in a five-minute surprise ceremony Monday morning, accelerating the planned handover by two days in an effort to avoid attacks by insurgents thought to be plotting to mar the event.

At the hastily arranged ceremony, held inside a high-security compound controlled by the American military, U.S. administrator L. Paul Bremer handed a signed document to the chief judge of Iraq's highest court announcing the dissolution of the U.S. occupation administration and the conveyance of political authority to the interim government.

The low-key handover marked the end of direct American control over Iraq's political affairs that began after the U.S. military toppled the government of President Saddam Hussein in April 2003. Bremer flew out of Baghdad on a military transport plane two hours after the ceremony. The new U.S. ambassador to Iraq, John D. Negroponte, arrived here Monday night and reestablished diplomatic ties that had been severed since Hussein's 1990 invasion of Kuwait.

Iraq's interim government, led by a prime minister who had been a CIA-supported opponent of Hussein, faces the challenge of running a country wracked by a violent insurgency, hobbled by economic stagnation and riven by religious and ethnic disputes. Although feared insurgent attacks did not occur after the handover was announced, there was little celebration by ordinary Iraqis, who remain deeply skeptical about the continuing U.S. role in their nation and the ability of the new government to address their problems.

Although Bremer's document stated that the interim government "will assume the complete sovereignty on behalf of the Iraqi people," it will still lack many of hallmarks of other sovereign nations. More than 130,000 U.S. troops will remain, with wide latitude to mount combat operations and detain Iraqis. A temporary constitution will restrict the interim government's power largely to the areas of basic civil administration and preparations for national elections scheduled for January. The country's oil revenue will be subject to international oversight. American personnel will continue to work out of Hussein's Republican Palace. And the government itself is supposed to be in power for only seven months, until national elections are held.

The interim prime minister, Ayad Allawi, acknowledged that his government faced "a hard task, a complex task." He called for national unity and cooperation in combating insurgents, who he vowed will "end up in disgrace and failure."

"The transformation will not take place in weeks or days or months, but this transformation will take years," he said in a televised address after he took an oath of office, standing in front of a bank of red-white-and-black Iraqi flags.

Despite the sober tone of the day -- there were no parades or public celebrations -- Allawi and other members of the interim government hailed the handover of political authority as a milestone in Iraq's transformation from dictatorship to democracy.

"This is a historic, happy day, a day that all Iraqis have been looking forward to," the interim president, Ghazi Yawar, said. "It's a day we take our country back."

Bremer said he had "confidence that the Iraqi government is ready to meet the challenges that lie ahead."

"You are ready now for sovereignty, and we think it's an important part of our obligation as temporary custodian to return the sovereignty to you," Bremer told Allawi and Yawar before handing over the document.

The handover, which had been scheduled to occur on Wednesday, was accelerated after discussions between Bremer and Allawi over the weekend, a senior U.S. official said. Both men were concerned that insurgent attacks timed to coincide with the handover would distract from, and possibly disrupt, the ceremony.

As the day approached for the handover, insurgents had escalated a campaign of car bombings, kidnappings and other violence in an attempt to interfere with the transfer. Apparently coordinated attacks across the country last Thursday killed more than 100 people. Insurgents have also captured and threatened to behead a U.S. Marine and four foreign civilians over the past two days.

Bush administration officials are hoping that the transfer of political authority will sap support for the insurgency among ordinary Iraqis. "You may not see a change right away, but over time there will be a significant transformative effect on the security situation," a senior administration official said.

President Bush, speaking in Istanbul at a NATO summit meeting, called it "a day of great hope for Iraqis and a day that terrorist enemies hoped never to see."

"The Iraqi people have their country back," Bush declared. "We have kept our word."

British Prime Minister Tony Blair, who dispatched the second-largest military contingent in last year's U.S.-led invasion, struck a more circumspect tone, saying in Istanbul that the transfer of power was "an important staging post on the journey of the people of Iraq toward a new future."

U.N. Secretary General Kofi Annan issued a statement welcoming "the state of Iraq back into the family of independent and sovereign nations."

On the streets of Baghdad, reaction was muted. While many people praised the transfer of authority, they also voiced doubts about whether it would result in improvements to their lives.

"I feel happy about this handover of authority," said Ghazwan Ali, a sidewalk fishmonger. But he questioned whether Iraq's sovereignty would be "complete and genuine."

"Genuine sovereignty means reconstruction, development and true independence," he said.

A few doors down, Khalil Mohammed Dawood, a 72-year-old retiree, insisted that sovereignty was "not complete as long as American soldiers are on our land."

Under an agreement with Allawi's government, U.S. forces will continue to conduct military activities across the country, although commanders have promised to have their troops adopt a less prominent posture and a more deferential style. The relationship that develops between U.S. commanders and the interim government, which has asked to be consulted before major operations are undertaken, could prove crucial in shaping public support for the new administration.

Despite the restrictions on his government, Allawi has promised to use his new authority to take more aggressive actions against insurgents. He said he would announce new security measures in the coming days. He and some of his cabinet ministers have suggested that a state of emergency may be declared in violent areas, allowing local authorities to impose curfews, ban public demonstrations and take other steps to restore order.

"The security of the country lies in our hands," he said.

But his ability to do more than make declarations will be limited at the outset. Iraq's new army has only 4,000 soldiers, and tens of thousands of policemen still have not been trained and properly equipped. That means that the responsibility for fighting the insurgency, at least for the foreseeable future, will rest with the U.S. military.

Officials expect Allawi's government to ask the U.S. military to hand over custody of Hussein and his top lieutenants, who are being held in U.S.-run detention facilities. Because the Iraqi government does not have prisons deemed secure enough, U.S. officials likely will offer to transfer legal, but not physical, custody.

Other than the handful of senior officials participating in the handover ceremony, which was not broadcast live on television, Iraqis had no knowledge of it as it was happening. The ceremony was so secretive that even members of Bremer's senior staff did not know about it until two hours before it began, an official said.

As Bremer turned over the document, Baghdad residents went about business as usual. It was not until 30 minutes later that the first news bulletins ricocheted across the capital, startling residents as they saw the news in cafes and office buildings. There was no noticeable celebratory gunfire, which often occurs during memorable moments in Iraq.

The brief ceremony occurred in a nondescript room in Allawi's new office. Other than Bremer, Allawi and Yawar, only three people participated: Chief Justice Mahdi Mahmoud, Deputy Prime Minister Barham Salih and British envoy David Richmond. They sat on chairs upholstered in gold fabric as a dozen aides and a score of journalists stood off to the side.

Bremer noted that Allawi's government, which includes 32 cabinet ministers appointed this month, had taken control of all of Iraq's ministries over the past few weeks. "You have moved very quickly to assume the authority," Bremer said.

The participants then stood and Bremer opened a blue portfolio to read from the document. "The task of the Coalition Provisional Authority will end on the 28th of June, and at this time, the occupation will end and the interim Iraqi government will assume the complete sovereignty on behalf of the Iraqi people," he said. "We welcome the steps of Iraq toward assuming its legitimate role among all free countries of the world."

Bremer said the document was signed by "Paul Bremer, ex-administrator," prompting chuckles from everyone in the room.

Allawi and the other members of his government were sworn in six hours after the handover, in a ceremony attended by several dozen people and televised live. Placing their right hands on a Koran, Allawi, Yawar and the others pledged to uphold a unified and democratic government.

After he took the oath of office, Allawi made an appeal for national unity and said he would invite members of Iraq's disbanded army and Hussein's Baath Party to return to public life. "Baathists who have not taken part in crimes will be rehabilitated," he said. The old army, he said, "is an army of Iraq, not of Saddam. They are our brothers and sons."

Allawi said he would reconstitute elements of the old army to combat the insurgency, which he blamed on outsiders. They are "mercenaries that come into Iraq from different countries to attack the Iraqi people," he said.

"Our dear Iraq is now at a setback, but it is a very temporary setback," he said. "We will rise up after that like mountains, standing up very firm. And we will protect all the people regardless of religion, color or any other consideration, so every Iraqi will have the right to their unified, united Iraq where brotherhood and justice prevail."

Correspondent Doug Struck and special correspondent Khalid Saffar contributed to this report.

L. Paul Bremer, right, the U.S. administrator of Iraq, hands over documents to Chief Justice Mahdi Mahmoud in official transfer of political authority to the interim Iraqi government. At center is Prime Minister Ayad Allawi.After taking oath, interim Prime Minister Ayad Allawi, left, is congratulated by Ahmed Chalabi, who served with him on the Iraqi Governing Council.