Saddam Hussein will be tried in a special Iraqi court, the head of Iraq's Governing Council has said.
Saddam Hussein was captured near his home town
Abdul Aziz al-Hakim said international monitors could observe the trial, which would take global legal standards into account.
He did not say whether the former Iraqi president, captured at the weekend, would face the death penalty.
Earlier, another member of the council said Saddam Hussein was being held in the Baghdad area.
Meanwhile, at least 10 people were killed in Baghdad on Wednesday when a fuel tanker exploded at a busy crossroads, engulfing a minibus.
It is still not clear what caused the explosion.
The US military said it was a traffic accident, not an attack. But Iraqi police said the tanker may have been driven by a suicide bomber on his way to attack a nearby police station.
Mr Hakim also said that that Iran deserved reparations for Saddam Hussein's invasion and the brutal eight-year war which ensued.
Iran has claimed $100bn in reparations, pointing out that Kuwait has already received billions of dollars through the UN's Iraqi Oil-for-food programme in compensation for the invasion of that country.
Mr Hakim said: "According to the UN, Iran deserves reparations. She must be satisfied. Whether we will pay or not is something which we need to discuss further."
But Mr Hakim is also the head of the Supreme Council for the Islamic Revolution in Iraq (Sciri) the most important Shiite Muslim party represented on the governing council.
Sciri has close ties with Tehran, where the party was based during Saddam Hussein's years in power.
Mr Hakim made his comments on Saddam Hussein's trial after talks with the UK Foreign Secretary Jack Straw in London.
"(Saddam Hussein) will be tried and after that we will do what the judge and the court will decide", Mr Hakim told reporters.
"The court will look at all the allegations against Saddam and the other
criminals of the Baath Party, and they will decide how to deal with these issues
according to international legal standards."
Just days before Saddam Hussein's capture, the Iraqi council announced that a tribunal would be set up to try members of the former regime.
The UK is against the use of the death penalty, but US President George Bush has said the ex-Iraqi leader should pay the "ultimate penalty" for his crime - a signal that he favoured execution.
It is not clear what caused the fuel tanker blast
However, both the UK and US have stressed that it is up to Iraqis to decide the fate of their ousted leader.
Speculation over the ousted leader's whereabouts has been intense since his capture on Saturday near his home town of Tikrit. The US military has only said that Saddam Hussein is being held at "an undisclosed location" in Iraq.
Council member Mowaffaq al-Rubaie went further, telling reporters: "Saddam Hussein is present in an area of greater Baghdad... God willing... he will be tried in Iraq in public by an Iraqi court."
He was responding to media reports that had suggested that Saddam Hussein had been flown to the Gulf state of Qatar.
On Wednesday Arab League officials said a fact-finding delegation, headed by Assistant Secretary General Ahmad Bin Heley, would leave for Iraq on Thursday.
The team will meet Council members, visit mass graves and discuss human rights violations by the former regime.
'Key suspect held'
US troops carried out a series of raids in the northern town of Samarra on Wednesday, dubbed Operation Ivy Blizzard.
Troops from three brigades, backed by armoured vehicles and helicopters, arrested at least 12 suspected Iraqi insurgents.
A key financier of anti-US attacks, Quaiss Hattam, was among about 80 suspects who were seized a day earlier, along with a large quantity of explosives, the US military said.
According to reports, the US military has gleaned key intelligence from documents found with Saddam Hussein.
Now that Saddam Hussein has been captured, the most wanted man in Iraq is his former deputy, Izzat Ibrahim al-Douri, accused by the US military of co-ordinating anti-coalition attacks.