The moves come amid near-daily rocket fire on US forces attributed to Shia paramilitary groups linked to Iran
The United States agreed in talks on Wednesday with Iraq to remove all remaining combat forces deployed to fight Islamic State extremists, although US forces will still provide training.
After a first "strategic dialogue" under President Joe Biden's administration, the two nations said that the Iraqi military had made substantial improvements.
"The parties confirmed that the mission of US and Coalition forces has now transitioned to one focused on training and advisory tasks, thereby allowing for the redeployment of any remaining combat forces from Iraq, with the timing to be established in upcoming technical talks," said a joint statement after the virtual strategic dialogue.
The moves come amid near-daily rocket fire on US forces attributed to Shia paramilitary groups linked to Iran, which led Biden to order airstrikes on affiliated camps in Syria.
But Biden, in a rare point of agreement with his predecessor Donald Trump, has been looking for ways to wind down what has come to be dubbed "endless wars."
Trump had ordered a drawdown in his final months from Iraq as well as Afghanistan with the number of US troops in each country dipping to 2,500 by January 15.
Former president Barack Obama, under whom Biden served as vice president, had removed all US forces from Iraq but sent troops back in faced with the brutal onslaught of the Islamic State extremist group.
"The transition of US and other international forces away from combat operations to training, equipping and assisting the ISF (Iraqi Security Forces) reflects the success of their strategic partnership and ensures support to the ISF's continued efforts to ensure ISIS can never again threaten Iraq's stability," the joint statement said.
Iraq in the statement pledged to protect bases with US-led forces, who Washington said were present "solely in support of Iraq's effort in the fight against ISIS."