Iraqi leaders have agreed at a United States-sponsored meeting to hold a national conference within four weeks to choose an interim government.
Some Shias feel they are not adequately represented
The move came after a day of talks with Jay Garner, the retired US general in charge of Iraq, who told them the country must have a democracy which represents all groups.
About 300 delegates, representing various religious, political and ethnic groups, attended the conference in Baghdad to discuss the formation of a transitional administration for Iraq.
In a speech to Arab-Americans in Michigan, among them many Iraqis, President George W Bush said the US would not impose its culture or form of government on Iraq.
And he repeated calls for the United Nations to lift the sanctions so that Iraqis could use their own resources to build prosperity.
But at the Baghdad meeting, there were clear divisions among delegates over what the role of the US should have during the interim period ahead of planned elections.
The conference began with a reading of the Koran, after which Mr Garner addressed the delegates who included clerics, academics, tribal chiefs and former Iraqi exiles.
The talks, he said, were aimed at "a democratic government which represents all people, all religions, all tribes".
Iraqis, he said, should be given the tools they needed for the reconstruction of their country.
The discussions lasted for more than eight hours, with delegates eager to speak out about their own agendas.
"If it goes like this, it will take months to get a government," Serdar Jaf, leader of a Kurdish clan told the Associated Press.
"Everyone has his own ideas. There's no programme, no agenda."
Mr Garner had previously said that he hoped the process of forming an Iraqi Government would start by the end of this week.
At the close of talks, delegates issued a statement which said: "All efforts should be made to hold a national conference within four weeks...to select a transitional Iraqi Government."
But they said this was just one step forward in a long and difficult process.
Among those attending the US-hosted meeting were members of the largest Shia group - the Supreme Council for the Islamic Revolution in Iraq (Sciri) - which boycotted earlier talks.
But major factional leaders - Kurdistan Democratic Pary leader Massoud Barzani, Jalal Talabani of the Patriotic Union of Kurdistan and Ahmed Chalabi of the Iraqi National Congress - were not present, AP reported.
US helicopters, tanks and soldiers formed a tight security cordon around the conference hall, as several hundred Shias gathered in the centre of Baghdad to protest against the talks.
Mr Garner said the first priority was to restore order, adding that talks on security would be held in Baghdad on Tuesday
Reporting from the meeting, the BBC's Claire Marshall said the biggest cheer came when Mr Garner pledged that Iraqi oil was for the Iraqi people.
Britain, the main US ally in the war, was represented at
the meeting by Foreign Office Minister Mike O'Brien.
Delegates raised concerns about the lack of security, electricity and water.
But our correspondent says one influential Shia leader sounded an optimistic note.
Baghdad residents are still facing shortages
"The Iraqi people owe a lot to the United States and the United Kingdom... for deposing the dictator," said Sheikh Hussein Sadr, dean of the Islamic Council in London.
But he added that Iraq could only be ruled by Iraqis.
The talks coincided with Saddam Hussein's birthday, an occasion marked in the past with massive state-organised celebrations.
But, on his 66th birthday, the ousted Iraqi leader's fate is unknown.
US-led forces now control the country, but are still facing street protests in the capital.
US military officials said they were committed to helping Iraqis form their own government, but until that time the coalition was the only legitimate authority in the country.
In other developments:
- US soldiers have killed at least four Iraqis in a firefight in the northern Iraqi city of Mosul on Monday, an American military officer quoted by Reuters says
- US Defence Secretary Donald Rumsfeld describes the war in Iraq as an historic success and says his country has entered a new era in which it must defend itself with pre-emptive action, as he tours the Gulf region
- UK Prime Minister Tony Blair says the hunt will continue for any chemical or biological weapons remaining in Iraq
- Mohamed ElBaradei, the head of the UN nuclear watchdog agency, calls for UN weapons inspectors to return to Iraq as soon as possible
- Abu Ghraib, a city of more than one million people about 20 kilometres (12 miles) west of Baghdad is said to have elected a city council in a poll which US officials helped organise.