US marines have agreed a framework plan to withdraw from the besieged Iraqi city of Falluja, says the local American military commander.
The city has suffered greatly during the fighting
Lt Col Brennan Byrne said this would allow a newly created all-Iraqi force to take control of the city.
He said this would happen on Friday, but US defence officials in Washington denied knowledge of a firm deal.
And hours after the announcement, US warplanes hit insurgent targets in the city again.
"We had a couple of F-16s and Navy F-18s drop six precision guided munitions in Falluja, destroying two buildings where anti-coalition forces were hiding or using to fire on marines," said Lieutenant Gary Arasin, an air force spokesman.
Falluja, a predominantly Sunni Muslim city of 300,000 people 50km (30 miles) west of the capital Baghdad, has been a hotbed of resistance to the US-led occupation of Iraq.
US forces moved against insurgents in the city on 5 April following the gruesome killings of four American private security contractors there.
Doctors in Falluja say some 600 people have already been killed since the siege began and thousands have fled.
Elsewhere in Iraq, 10 US soldiers have been killed in attacks - eight in a car bombing south of Baghdad.
'Falluja Protection Army'
Col Byrne told reporters he had reached an agreement with a group of former Iraqi military officers to bring an end to the intense fighting that has ravaged parts of Falluja.
He said it would be known as the Falluja Protection Army (FPA), and would be made up of about 1,100 Iraqi soldiers led by a former general from the Saddam Hussein era.
"The plan is that the whole of Falluja will be under the control of the FPA," said Col Byrne.
However, he said the force would ultimately be subordinate to the marines, who would remain in the area, but outside the city itself.
The BBC's Dominic Hughes, in the Iraqi capital, says the plan has many holes.
Just how much influence the new force will have over rebel fighters in the town is not known, he says, and neither the Pentagon, nor the Coalition Provisional Authority in Baghdad appears to have any knowledge of a deal.
Officials at the Pentagon insisted discussions were continuing - and that US marines had not begun disengaging from the area.
US commanders have held back from an all-out assault on the city.
They insisted that the insurgents - who they say include former members of Saddam Hussein's Republican Guard military units and foreign Islamic militants - should turn in their heavy weapons. It is unclear whether this demand is covered by the reported agreement.
The image of the US marines withdrawing from an Iraqi city, effectively admitting that they cannot control it, is not one which pleases the Pentagon, says the BBC's Justin Webb in Washington.
However much this action might be seen as prudent and wise, it could also send out a message that America in certain military situations is impotent, our correspondent says.
A new opinion poll suggests dwindling support among Americans for the invasion and occupation of Iraq.
Only 47% of 1,042 Americans questioned believed invading Iraq was the right thing to do, the lowest support recorded in
the polls since the war began.