The US-led coalition in Iraq plans to release 506 prisoners, with the first batch of 100 to be freed on Thursday.
The coalition is holding at least 10,000 prisoners in Iraq
The top US administrator in Iraq, Paul Bremer, said it was a goodwill gesture aimed at reconciliation.
Those released "must renounce violence", Mr Bremer told reporters, adding it was "not for those with blood-stained hands".
Mr Bremer also unveiled a $200,000 reward programme for the capture of more wanted individuals in Iraq.
At least 10,000 prisoners are being held in Iraq by the US-led coalition, including almost 4,000 members of an anti-Iran rebel group.
Mr Bremer said he wanted to give some of those prisoners a fresh start.
"In a gesture to give impetus to those Iraqis who wish to reconcile with their countrymen, the coalition will permit some currently detained offenders to return to their homes and
families," he said.
"No person directly involved in the death or serious bodily harm to any human being will be released."
Mr Bremer said those being freed must have a guarantor in their local community - such as a religious or tribal leader - who can accept responsibility for the person's conduct.
The BBC's Chris Hogg, in Baghdad, says the top US administrator has faced fierce criticism on the prisoner issue from tribal and community leaders.
International human rights groups have alleged that thousands of detainees are still being held without charge in often overcrowded and unsanitary conditions.
Coalition officials said those to be freed were chosen from an initial list of several thousand prisoners.
A three-member coalition board made up of one military intelligence official, one military judge advocate and one military police official narrowed the list to about 1,200 candidates, and then to 506.
But Iraqi human rights activists say they are disappointed the US is not setting more prisoners free.
"Five hundred people is very little when you go downtown and see all the families and when you ask them [the authorities] if they have a son or a husband they say, 'We don't know'," Iraqi rights lawyer Omar Tawfik told the BBC.
"No-one can ask anything. When you go to the police station they don't do anything and that makes the families angry."
The reward money announced by Mr Bremer is for the capture of 30 Iraqis suspected of involvement in attacks against coalition soldiers.
Following the capture of ousted Iraqi leader Saddam Hussein, the most wanted man in Iraq is his former deputy, Izzat Ibrahim al-Douri.
He has a $10m bounty on his head, while 12 other suspects carry rewards of $1m each.