"All we want is ... that the Iraqi government is able to exercise its sovereignty and authority in a way that acquires credibility," Secretary-General Amr Musa told reporters on Monday.
But Arab analysts cast doubt on the significance of the transfer, which leaves more than 160,000 foreign troops and security personnel in Iraq outside the control of the transitional Iraq government.
The analysts said they expected most Arab governments would maintain their "wait-and-see" attitude towards the Iraqi government, withholding full diplomatic recognition for now.
Hasan Nafaa, chairman of the political science department
at Cairo University, said the conflict was unlikely to end as
long as foreign forces were present.
"The Iraqi people are not easily duped," he said.
Mustaya al-Sayyid, a professor of political science at the university, said: "It's not really a genuine transfer, with this heavy American military and civilian presence and with a low requirement that American troops get authorisation before taking any military action."
The US and the Iraqi government have portrayed the transfer as a decisive step towards putting Iraqis back in charge of their country after 14 months of occupation.
But Arabs outside Iraq, who mostly opposed the invasion, suspect Washington wants to retain its influence over Baghdad while giving the impression that Iraqis are fully in control.
'No major change'
"The United States wants Iraqis to fight Iraqis and reduce the rising cost of its military presence in the country. The world opinion will not swallow this sham transfer of authority," added Mustafa Ramid, a Moroccan member of parliament from the moderate Islamist Justice and Development Party.
Ordinary Egyptians, who mostly distrust the United States because of its Middle East policies, were also sceptical.
Kuwait has said it will restore
ties with the 'new' Iraq
"They (the US) chose the government now in Iraq so it's going to do what they want," said Samir Eid, 52, owner of an antique shop in downtown Cairo.
Some Lebanese felt the same way. "I don't think this will be a major change. (The new government) is like a toy they can play with... At the end of the day the decisions will be taken by the American government," said businessman Wisam Isa.
Meanwhile, Egypt and Kuwait, Arab states close to the United States, welcomed the transfer. Egyptian Foreign Minister Ahmad Mahir said giving authority to Iraqis would make it easier to restore stability in Iraq, where conflict has raged since the US invasion in March 2003.
"That's what Egypt desires for the Iraqi people, to provide an opportunity for them to take control of their own affairs and restore complete sovereignty," Mahir told reporters.
Kuwait, occupied by Iraq in 1990-91, said the transfer in Baghdad on Monday marked the "start of a new era".
On Monday, the oil-rich emirate announced that it was restoring full diplomatic relations with Iraq.