The radical cleric Moqtada Sadr visited Iraq's most influential Shia leader, Grand Ayatollah Ali al-Sistani, in Najaf on Saturday.
Moqtada Sadr was said to have received Ayatollah Sistani's blessing
The senior cleric "blessed the efforts" of Mr Sadr to resolve the stand-off in Najaf, said Mr Sadr's spokesman.
Late last week, Mr Sadr agreed to withdraw his Mehdi Army fighters from the holy cities of Najaf and Kufa in tandem with a withdrawal by US forces.
Shops and schools are reopening in Najaf as Iraqi police move back in.
Residents expressed relief that a measure of security was returning, weeks after the closure of his newspaper and the arrest of a key aide prompted Mr Sadr to launch an uprising against occupation forces.
"We heard there is a truce now. Thank God," Mohammed Abdul Amir, owner of an electrical store, told Associated Press.
The agency reported that by midday Mr Sadr's militia had withdrawn from all but the most sensitive religious sites as Iraqi police took up vacated positions.
However, violence continued in Mr Sadr's stronghold in Baghdad of Sadr City. Two US soldiers were killed in a roadside bomb, and the US said several assailants had been killed in earlier fighting.
Mr Sadr's spokesman, Ahmad al-Shibani, told the Qatari satellite station al-Jazeera that Mr Sadr had visited Ayatollah Sistani to update him on "the developments of the uprising, the peace initiatives and the agreements that took place... the entire picture".
Ayatollah Sistani had, he said, "blessed the arduous efforts exerted by Moqtada Sadr personally to resolve this issue peacefully. These results are good".
He said the meeting had lasted about half an hour.
The spokesman called the visit "very normal", but correspondents say it reflects Mr Sadr's heightened status and puts the Shia establishment seal of approval on the peace deal.
They say Ayatollah Sistani had previously not bothered to conceal his disdain for the upstart cleric.
Meanwhile, the US appeared to soften its demands that Mr Sadr turn himself in on charges of murdering a cleric last year.
While insisting Mr Sadr must still face justice, coalition spokesman Dan Senor reportedly said it was for Iraqi leaders to decide the timing.