Speaking at the UN Security Council on Tuesday, al-Ibrahimi said such an interim government would have one month to prepare for assuming power on 30 June - the deadline for the US-led occupation authority to transfer power to Iraqis.
"Though it will certainly not be easy, we do believe that it shall be possible to identify by the end of May a group of people respected and acceptable to Iraqis across the country, to form this caretaker government," al-Ibrahimi said.
Al-Ibrahimi proposed the dissolution of the current US-appointed Iraqi Governing Council. He argued for the appointment of non-partisan experts to the interim government instead.
He said it was important members of the caretaker government shunned partisanship.
"It is best if the members of the caretaker government, including the interim president, vice presidents and prime minister, were to choose not to stand for elections," he said.
"Though it will certainly not be easy, we do believe that it shall be possible to identify by the end of May a group of people respected and acceptable to Iraqis across the country, to form this caretaker government"
The interim government is expected to oversee Iraqi general elections in January 2005.
Al-Ibrahimi proposed organising a national conference of at least 1000 people to allow the Iraqis to communicate with each other for the first time in three decades. This conference would elect a consultative council to provide advice to the government and receive reports from ministers.
The UN envoy also warned the occupation forces that an armed confrontation with resistance fighters in Falluja would lead to major bloodshed and long-lasting consequences.
"The Coalition Provisional Authority is well aware that, unless this standoff is brought to a resolution through peaceful means, there is great risk of a very bloody confrontation," al-Ibrahimi said.
"A viable political process is no panacea, but it is a powerful contribution factor to security," he stressed.