The U.S. military released a senior aide to the rebellious Shiite cleric Moqtada Sadr on Thursday, and Sadr aides said momentum was growing toward an agreement to disband the cleric's militia, which would halt a major element of the insurgency in Iraq.

Moayed Khazraji, a fiery Baghdad cleric whose arrest a year ago signaled the start of a U.S. crackdown on Sadr's movement, walked out of Abu Ghraib prison near Baghdad on Thursday morning. No explanation for the release was offered by the U.S. military or Iraq's interim government.

But Khazraji's freedom was taken as a gesture of good faith in talks aimed at transforming Sadr's following into a political movement before nationwide elections promised for January. The release of imprisoned senior aides has been a primary demand of the Sadr camp, which said it was encouraged.

"It would appear to be a softening of the Americans' position," Mahmoud Sudani, another Sadr adviser, told the Reuters news agency.

The disbanding and disarming of Sadr's Mahdi Army militia would be a major accomplishment for the interim government, which is struggling in large tracts of the country to establish the security needed to hold free elections.

Sadr's following draws heavily on young Shiite Muslims neglected or abused by the former government of Saddam Hussein. It is the only insurgent movement to take hold among Shiites, who account for an estimated 60 percent of the country's population of 25 million. A peace deal could calm much of southern Iraq and the Sadr City slum in eastern Baghdad, where the Army's 1st Cavalry Division has battled the militia for weeks.

Another Sadr spokesman told an Arabic-language television news channel that under the deal, the fighters would turn in heavy and medium weapons, such as mortars and rocket-propelled grenades. The remarks by Ali Smeisim to al-Arabiya echoed the terms detailed a day earlier by the interim prime minister, Ayad Allawi.

Allawi has authorized the U.S. military to keep the pressure on the militia in Sadr City, which is named for the cleric's slain father. He said Sadr's side also promised to respect the authority of Iraqi police, who will replace U.S. troops in the area.

Parallel negotiations are underway for control of Fallujah, a city 35 miles west of Baghdad that has been under the control of Sunni Muslim insurgents since April. Talks are set to resume on Saturday, according to participants.

"We told the government that we don't want peace like the one they provided in Najaf. We don't want a peace like the one they restored in Samarra," said Khaldi Jumaili, an insurgent leader who took part in several days of negotiations with leaders of the interim government. He referred to overwhelming U.S. military offensives that resulted in the ejection of Sadr's forces from the holy city of Najaf in the south in August and the north-central city of Samarra this week.

"With Fallujah, the situation differs," he said. "We have an agreement that will be signed by the president, the prime minister, the minister of defense, the minister of interior, the deputy prime minister and the people of Fallujah."

[Early Friday, U.S. aircraft attacked what the U.S. command said was a hideout of Jordanian-born insurgent leader Abu Musab Zarqawi in Fallujah, the Associated Press reported. The military said "credible intelligence sources" reported terrorist leaders were meeting there. A Fallujah doctor said a wedding groom was among 10 people killed in the attack, which he said wounded the bride and 16 others.]

The apparent progress came during continued lethal ambushes of U.S. forces and new attacks targeting Westerners in Baghdad.

A soldier with the 13th Corps Support Command was killed and two others wounded, one seriously, by an explosive device Wednesday night near Fallujah. A roadside bomb killed a 1st Infantry Division soldier and wounded a civilian interpreter near Baiji, north of Baghdad, around midnight Wednesday.

One of the crude bombs known as improvised explosive devices was also discovered in front of a restaurant frequented by U.S. civilians and military in the heavily fortified Baghdad compound now known as the International Zone. The discovery of the bomb, which was disposed of without injury, elevated security warnings in the area.

A hotel housing many U.S. contractors and journalists, including the offices of The Washington Post, was also targeted. Insurgents fired 155mm artillery shells toward the Ishtar Sheraton in early evening from what witnesses described as homemade tubes on a van. One shell landed on a wall between two rooms on the first floor, setting fire to both. There were no injuries.

The U.S. military keeps a small security contingent at the hotel, and during the attack, several of its members were having dinner in a penthouse restaurant. The soldiers scrambled to windows and returned fire. It was at least the third such direct attack on the hotel; none has caused injury.

Special correspondent Omar Fekeiki contributed to this report.