Mowaffaq al-Rubaie, Iraq's national security adviser, said at the handover ceremony in Hilla that domestic security forces would soon take over the nearby province of Wasit from the US military.
"I want to declare from Babil that Iraq will take over Wasit in the next few days and we hope to complete the transfer of the remaining provinces in the near future," al-Rubaie said.
"Today the security forces of Babil are self-reliant and we are proud to take over Babil from US forces."
The handover ceremony was attended by senior US officials, including Lieutenant-General Lloyd Austin, the number two commander of US forces in Iraq.
With the transfer of the province, American forces will retreat to their bases and become involved in security operations only at the request of the provincial governor.
Baghdad, Diyala, Salaheddin, Ninawa, Kirkuk and Wasit remain under US control.