"The government welcomes the announcement by Sadr that his militia will disband, hand over their weapons, respect the authority and the unity of the state and abide by the rule of law in Iraq," said a statement issued on Friday in the name of Qasim Dawud, Iraq's national security adviser and chief negotiator.
"Unlike the old regime, this government will abide by its pledges to afford equal and fair treatment to all as well as to offer amnesty to those who have not committed crimes against the Iraqi people," the statement said.
If a deal were to be struck with al-Jaish al-Mahdi (al-Mahdi Army), not just in Sadr City, but in other Shia flashpoints around the country, it could go some way to stabilising the country ahead of elections due in January, although the Sunni-led insurgency remains a severe problem in central and northern Iraq.
The announcement came in response to an offer made by al-Sadr's top aide in a televised address on Thursday.
In a broadcast on al-Arabiya television, aide Ali Smaism said the militia would disarm if al-Sadr's aides were freed from US detention, if US forces stopped "persecuting" al-Jaish al-Mahdi and reparations were paid.
Al-Jaish al-Mahdi has repeatedly
fought US forces
Al-Sadr, via his aides, has also demanded financial assistance
in the rebuilding of Sadr City, a huge Shia slum district of Baghdad where al-Jaish al-Mahdi have a strong presence and where there have been recent nightly clashes with US forces.
In his statement, Dawud said reparations could be paid.
"The government looks forward to this undertaking being
respected and implemented," he said.