Nuri al-Maliki's reconciliation plan includes an amnesty for fighters and opposition figures who have not been involved in "terrorist" activities. He said, however, that killers would not escape justice.
"The plan is open to all those who want to enter the political process to build their country and save their people as long as they did not commit crimes," al-Maliki told MPs in his opening remarks
"Reconciliation and national dialogue does not mean honouring and reaching out to the killers and criminals, no and a thousand nos, there is no reconciliation with those until they are punished for their crimes."
Al-Maliki has vowed to defeat the insurgency and to reconcile Shia and Sunni Muslims.
Details were left ambiguous. Early drafts of the plan were said to have excluded only those who had killed Iraqis. But in his speech, al-Maliki said amnesty would be refused to those who had committed "terrorist acts", believed to include attacks on multinational military personnel.
Al-Maliki said a dialogue should be opened with all organisations willing to participate in the political process "except al-Qaeda" and hard-line supporters of Saddam.
Al-Maliki said he would deal with the powerful militias but did not give any details on how this would be achieved. Many have ties with government parties.
The plan says there should be a timeline established for Iraqi forces to take over all security duties in the country. It does not specify when American and British forces should pull out.
Japanese troops are crossing into
Kuwait as they pull out of Iraq
Former detainees "and those who were killed by Iraqi and American forces" would be compensated under the plan and their time in prison would be considered as part of their mandatory military service.
Hundreds of prisoners have been pardoned and released in recent months in what is seen as a bid by the Shia-dominated government to appease Sunni Arab anger over allegations of random detentions and mistreatment.
The proposal would set rules of engagement for military offensives, requiring military leaders to take into consideration conditions that might argue against an attack.
Al-Maliki promised a review of the policy of purging former members of Saddam Hussein's government from state institutions, a policy which is believed to have added many to the ranks of those fighting the US-led presence in the country.
The US military said it had detained 11 "terrorists" during raids on Sunday near Ramadi in the western Iraqi province of al-Anbar.
The military said security forces were targeting two "foreign terrorist facilitators who run Al-Qaeda in Iraq and foreign terrorist safe houses".
"Ground forces secured multiple buildings at the target location and detained 11 suspects without incident," the military said.
Troops discovered two weapons caches including several small arms, suicide vests, body armour, grenades and an improvised-explosive-device manual, US forces said.
In the south of Iraq, the Japanese soldiers pulling out of Iraq started to cross the border into Kuwait, according to the Japanese Defence Agency.
The withdrawal of the 600-strong force conducting a humanitarian and reconstruction mission began with the departure of about 15 vehicles transporting trucks, bulldozers and equipment from the provincial capital of Samawah, on Sunday morning, for the 350km journey south to Kuwait.