Blackwater's licence has been renewed for another year
Security firm Blackwater has had its contract to protect US diplomats in Iraq extended.
The move comes despite the continuing FBI investigation into the killing of 17 Iraqis by Blackwater staff guarding US officials in Baghdad last September.
Blackwater says its guards acted in self-defence. An Iraqi inquiry concluded the shooting was unprovoked.
The security company's contract was due to expire in May, but the government of Iraq said it had now set new criteria.
State department head of security Gregory Starr said on Friday the contract had been extended for another year.
Iraq's government said requests for tighter controls on Blackwater's activities had been met.
"The demands of the Iraqi government have been taken into consideration and Blackwater will follow the Iraqi government's laws," said Iraqi government spokesman Ali al-Dabbagh.
However, the Iraqi government's political opponents called the move a "violation of the Iraqi judicial system".
"The government should have shown its influence and authority by taking the initiative," a spokesman for the mainly Sunni Arab Accordance Front bloc told Reuters.
"But the Americans want to show that Iraq is under their control."
Blackwater employees have been used as guards and armed drivers in the US embassy complex in the Iraqi capital.
The FBI started its investigation into the killing of 17 Iraqis in November. That month, the New York Times reported the bureau had found that 14 of the deaths were unjustified.
When asked if the company's contract could be cancelled if Blackwater was found at fault, Mr Starr was quoted by Reuters as saying: "We can terminate contracts at the convenience of the government if we have to."
"I am not going to prejudge what the FBI is going to find in their investigation. I think really, it is complex. I think that the US government needs protective services," he said.
"Essentially I think they do a very good job. The 16 September incident was a tragedy. It has to be investigated carefully," he added.
In October the Iraqi government approved a draft law revoking the immunity from prosecution that private security contractors enjoyed under Iraqi law.
The US has since put in place new guidelines for private security contractors.