According to spokesman Thair al-Naqib on Sunday, Iyad Allawi is in negotia-tions on what cabinet posts it will receive.
"Allawi decided that his bloc will take part in the new government because he believes in making the political and democratic process in Iraqi successful," al-Naqib explained.
The PM's supporters had previously said they would not join the government, preferring to act as opposition in parliament.
But his bloc has 40 seats in the 275-member parliament, behind the Shia Islamist-led alliance that secured a parliamentary majority and a Kurdish coalition that won 75 seats.
Al-Naqib said Allawi's bloc wanted four cabinet posts, including one of the main ministries, as a condition for participation in the government.
Parliament agreed last week that Shia leader Ibrahim Jafari would be the new prime minister, with Kurdish leader Jalal Talabani as president. Cabinet posts are still being worked out.
In a separate development, the current interim president Ghazi al-Yawir met with the head of the Association of Muslim Scholars (AMS), Shaikh Harith al-Dari, to talk about its role in shaping the political landscape.
However, al-Yawir's spokesman - Ahmad al-Janabi - confirmed to Aljazeera that the AMS has no plans to change its stand against participation in government, though al-Dari said the group would continue to speak out on political and social issues.
In other developments, at least seven Iraqis were killed and a power plant manager was kidnapped in continued violence around the country on Sunday, police and hospital sources said.
In one attack, three Iraqis were gunned down near Iskandariya as they waited for their cars to be repaired on a road just south of the capital, police said.
In another incident, a member of the Shia political party, the Supreme Council for Islamic Revolution in Iraq (SCIRI), was killed and another was wounded in a drive-by shooting in southern Baghdad, an Interior Ministry source said.
Iraqis gather looking at the debris
following a car bomb in Baquba
In northern Iraq, Abd al-Rahman Buraisam, director of the Buhruz power station, was kidnapped by three armed men about 60km northwest of Baghdad, the Interior Ministry source said.
In Farhad, a national guardsman was killed and three others were wounded when a roadside bomb hit their car 110km south of Kirkuk.
The bomb sparked a firefight that resulted in the arrest of three suspects, according to police.
In Mosul, Ajil Muhsin Ajil - a member of the local government council - was killed in a drive-by shooting, according to police Captain Isam Abd al-Wahid.
Another Iraqi was killed and three policemen were wounded in a grenade attack targeting a police convoy in the city, police Major Muhammad Fathi said.
Sunni scholar Shaikh Mujahid Muhammed Taha was shot dead by unknown assailants on Saturday in strife-torn Mahmudiya, a representative of the Sunni Muslim Waqf said.
Meanwhile, medical sources said they received the bodies of two Iraqi soldiers killed by anti-government fighters near the Iranian border in Kut, 172km south of the capital.