Is this a step forward or a step backwards for the US marines in Falluja? On the face of it, some marine units are indeed pulling back.
The task of bringing security to the town is to be handed over to a new all-Iraqi unit, headed by one of Saddam Hussein's generals, who will report to the commander of the marines.
The US military is making way for Iraqi troops
But looked at more broadly, it could be a step forward in terms of defusing the volatile flashpoint of Falluja.
This deal sounds tentative and raises as many questions as it answers.
Is the job of the new Iraqi unit to disarm Sunni fighters in the town?
Are the killers of four US contract workers to be handed over? This was, after all, the marines' chief mission.
And what will happen to the remaining Sunni insurgents in the town? Will they simply re-emerge to fight another day?
This unprecedented local arrangement where Sunni troops from Saddam Hussein's army come forward to provide security also raises interesting questions.
Where did this fledgling force come from? And could the Falluja example of using the old Iraqi military for security duties be repeated elsewhere?
Force has limits
It is still too early to answer most of these questions. But if the Falluja deal works, it could have significant repercussions.
For the first time, the Americans have negotiated, albeit indirectly, with Sunni insurgents.
The result has been a potential Iraqi solution to a problem that threatened to spill way beyond the dusty streets of Falluja.
The threats from US commanders to go in and clear out the town have subsided. And with good reason. Large numbers of civilians have already been killed there.
Further heavy fighting would have risked, not just additional loss of life, but potentially the spread of similar insurgencies to other towns.
In a month that has seen escalating US casualties and the first real signs of discontent in the opinion polls back home, President Bush probably would prefer to find a way out from Falluja that avoids a major escalation.
Falluja has thus clearly demonstrated the limits to the application of military force in Iraq.
Overwhelming firepower is all very well, but in nation-building, it is the consequences of the use of force that matter.
It is far from clear how US security goals will now be secured in Falluja.
That is perhaps why the Pentagon is so eager to stress that this is a local arrangement.
The US withdrawal could be seen as a retreat, though this agreement may be an honourable way to avoid a potential catastrophe.
The old Iraqi generals are returning to Falluja
Nonetheless, it is still a shaky deal at best. If it works, it may be a formula that could be repeated elsewhere.
If so, it would certainly underscore what many people see as the initial US error of rapidly disbanding Saddam Hussein's military machine.
But if it does not work, then the Falluja problem will be posed again in the starkest of terms.