The deployment, which is said to have begun on Friday night, will move about 1,000 men to a base in southern Iraq controlled by coalition forces.
The force is under the control of the Iraqi National Congress and its leader, Ahmed Chalabi, who will accompany his troops into Iraq.
To help coalition forces in the area clear remaining resistance from militias loyal to Iraqi President Saddam Hussein, and restore security.
"These are Iraqi citizens who want to fight for a free
Iraq, who will become basically the core of the new Iraqi
army once Iraq is free," General Peter Pace, vice chairman of the US Joint Chiefs of Staff, told the American television network ABC.
The fighters were volunteers "from all over", including expatriates arriving from the United States, he added.
Coalition troops in southern Iraq have had a mixed reception from local people, despite the apparent distaste of the majority Shia population for Saddam Hussein.
'Source of friction'
Mr Chalabi is the most prominent leader of the often fractious groups who have fought to overthrow the regime of Saddam Hussein.
Born in Baghdad in 1944, he and his family went into exile after a 1958 military coup.
ABC's Charles Glass says Mr Chalabi has been a source of friction in the current and previous US administrations.
His detractors, primarily in the Central Intelligence Agency and State Department, argue that he has little support inside Iraq. His supporters, primarily in the Pentagon, argue that he is a skilled and able politician who is committed to bringing democracy to Iraq.
Sunday also saw Deputy Defence Secretary Paul Wolfowitz stress the importance of the Iraqi people deciding their own future.
Asked whether the Iraqis could set up a new government as quickly as the Kurds set up a territory in northern Iraq that they began governing in 1991 after the first Gulf
War, Mr Wolfowitz said it would take longer.
"Six months is what happened in northern Iraq," he told Fox News.
"This is a more complicated situation. It will take more than that."