Iraqi forces are to take control of a second province under overall British command next month, Iraqi Prime Minister Nouri Maliki has said.
Dhi Qar province is patrolled by mostly Italian troops
Dhi Qar in the south is the second area to come under local control.
There are few British soldiers there, and the troops who will leave include 400 Romanians and a large part of Italy's Iraqi contingent of 1,600.
In the capital Baghdad, at least 14 have been killed in a bombing at a crowded market.
On Wednesday, at least 50 people died in a wave of attacks, including a blast at a busy Baghdad market and another at an army and police recruitment centre.
Italy has signalled that it wants to pull its forces out of Iraq altogether by the end of 2006.
That has taken on even more urgency now that it has committed itself to the command of the UN peacekeeping force going into southern Lebanon, says the BBC's David Loyn in Baghdad.
The move is part of the overall process to disengage foreign forces, but the southern area is more stable than the area around Baghdad.
In London, the defence ministry said UK forces were expected to transfer security control to local troops "imminently".
Iraq's total take-over of Dhi Qar is a much more significant event than the handover earlier this year of the first province, Muthanna - a mostly desert area, our correspondent adds.
Nasiriyah, the capital of the province, was the scene of fierce fighting during the war to topple Saddam Hussein in 2003.
The Tigres River and a key road route for supplying US-led forces in Baghdad run through the province.
UK Defence Secretary Des Browne has been in Iraq for talks on the timing of handovers for the remaining three southern provinces under UK control.
There are currently 7,200 UK troops in the British-controlled south of Iraq, most of them in the Basra area.
Giving power to Iraqi forces would halve the number of UK troops in the region to between 3,000 and 4,000.
UK Prime Minister Tony Blair has said significant numbers of UK troops could start leaving parts of Iraq during the next 18 months.