The newly appointed Governing Council of Iraq has agreed to establish a war crimes tribunal.
Saddam's regime left mass graves across Iraq
The US-backed body will create a judicial high commission to run a special court system charged with trying former members of Saddam Hussein's regime and suspects accused of crimes against humanity.
"These are not normal crimes we are talking about," a spokesman told reporters, saying the crimes would cover the killings of hundreds of thousands of people.
Civil rights group Human Rights Watch, however, said an Iraqi tribunal could not be expected to administer impartial justice to the ousted Iraqi regime.
A sub-committee formed to make recommendations on the tribunal is led by a Kurdish judge, Dara Nor al-Din, who once served eight months in prison for challenging
a law over confiscation of land without due compensation.
As the Council met, the US administrator in Iraq, Paul Bremer, announced that the occupation forces would not remain in Iraq indefinitely.
"Our time here is in the hands of the Iraqi people," he told reporters in Baghdad, adding that his priority was to see in free elections.
'Victims as judges'
The Governing Council's move echoes a decision taken by the occupying forces in April.
The US and Britain had said Iraqi war crimes suspects would be tried by a panel of Iraqi judges made up from those not tainted by a role in the old system.
The US-UK decision was quite deliberate, says the BBC's Paul Reynolds - designed to allow Iraqi people to impose their own justice.
MASS GRAVES IN IRAQ
Kirkuk: Kurdish officials report discovery of 2,000 bodies
Muhammad Sakran: Reports say more than 1,000 bodies found
Babylon: Children's bones reportedly among remains found
Al-Mahawil: Up to 15,000 bodies feared buried
Najaf: 72 bodies found
Basra: Grave believed to contain about 150 Shia Muslims
Abul Khasib: 40 bodies reportedly found
But Entifadh Qanbar, member of the Iraqi National Congress, said the US had still not decided what to do with the most wanted members of Saddam's regime.
"The Governing Council will take it upon itself to
try them and to punish them according to law," he told Reuters news agency.
"That includes Saddam Hussein, the biggest criminal."
Among cases he said would be investigated were:
The reported killing of 8,000 members of the Kurdish Barzani clan in 1983
The reported killing of 300,000 Shia Muslims after the 1991 Gulf War
Human Rights Watch has questioned the justice of having victims try their former persecutors.
"Saddam's victims should not be overseers of the justice system," the organisation's London director, Hania Mufti, told AP news agency.
"It should be independent of both the former regime and its victims."
The 25-member Council, which only took form on Sunday and is the country's first national political body since downfall, also decided on creating a commission for eradicating the former ruling Baath party from Iraqi society.
It is already tasked with convening a conference on drawing up a new constitution.
Mr Bremer said the new constitution would be "an Iraqi affair - by Iraqis, for Iraqis".
He predicted that after elections were held the coalition's job would be "done".
Meanwhile, US soldiers who had been expecting to be sent home from Iraq soon have been told they will remain in the Gulf indefinitely.
Soldiers - and their families - reacted with dismay to the news that they would not be home in September as they had hoped.
Britain's most senior envoy in Iraq, John Sawers, said separately on Tuesday that a new Iraqi Government might ask the coalition to keep on troops for "some time".
Mr Sawers added that the success of elections depended on the drafting of the new constitution.
Elections, he said, "should be achievable some time in 2004".