Nuri al-Maliki, a Shia Islamist politician, told a news conference on Tuesday: "Maybe today or tomorrow, we will complete the formation of the government. We have achieved much and there is little left to do."
After months of political deadlock since elections in December, the US has pressured al-Maliki's dominant Shia Alliance to form a government of national unity that Washington says is necessary to reduce sectarian violence and avert civil war.
An important issue in forming the government against the background of violence between rival militias and rebel groups has been the control of the defence and interior ministries.
"The heads of the parliamentary groups have agreed that the heads of these two ministries should be independent and not belong to any party that runs a militia," al-Maliki said.
The interior minister is accused
of condoning police death squads
This would suggest that Bayan Jabr Soulagh, the interior minister, is likely to go.
A member of the Iran-backed SCIRI Shia Islamist party which controls the armed Badr movement, Soulagh has been accused of condoning police death squads.
Though he denies it, the US ambassador has made it clear that Washington wants him out of his job.
Al-Maliki said posts still under discussion included the oil, trade and transport ministries, all important to the task of reviving Iraq's crippled economy.
Within the deadline
He has nearly another two weeks under a constitutional deadline to present a cabinet to parliament, but negotiators have been voicing confidence that agreement among the main Shia, Kurdish and Sunni factions was not far off.
Saadoun al-Dulaimi, the defence minister and a Sunni independent, is more low key but negotiators have said he is not likely to keep his post.
Some Iraqi politicians view him as a violent character, and say that he used excessive military force inside cities to combat Iraqi fighters.
Al-Dulaimi's statement last October that "we will destroy their houses on their heads and their women and children's heads" referring to anti-US fighters in the Sunni governorate of al-Anbar, stirred resentment among many Iraqis.
Salih al-Mutlag said his Sunni coalition demanded five cabinet posts - defence, commerce, electricity, education, and culture.
Al-Mutlag told Aljazeera.net that his coalition would fight to prevent an Iraqi government based on sectarian and ethnic backgrounds.
"Sectarian and ethnic governments have failed all over the world. If the coming government was formed according to those lines, then sooner or later Iraqis would find that it is of no difference from the failed Governing Council," he said.
Offer to rebels
Al-Maliki, though seen as a Shia hawk when named last month, said he was ready to reach out to Sunni rebels who laid down their arms and joined the US-backed political process.
"If there are those who took up arms against the political process but did not shed Iraqi blood, I will welcome talks with them to disarm them and bring them into the political process for the sake of the nation," he said.
Iraqis who have fought US occupying forces are viewed differently by Iraqis to bombers who attack civilians.