Coalition forces in southern Iraq are set to hand over authority in Muthanna province to the Iraqi government, a British spokesman in Basra has said.
The training of Iraqi soldiers will be the key to the foreign pull-out
But UK troops would not start leaving the relatively-peaceful province until "up to 45 days" after the agreement was officially announced, he told BBC News.
The announcement could be made as early as next Tuesday, reports suggest.
British, Australian and Japanese troops control the province, the largest of five in the UK-run south east of Iraq.
About 170 British troops are stationed in the sparsely populated province, which borders Saudi Arabia and is mostly desert.
It has not yet been decided which of the coalition partners will be responsible for "tactical overwatch" - returning to support the Iraqis if trouble breaks out.
Japan has about 600 non-combat troops carrying out humanitarian tasks in Muthanna's capital, Samawah.
Australia has about 460 soldiers guarding the Japanese.
The Australian contingent has also been responsible for training Iraqi soldiers in the province, ready for them to take over.
Prime Minister Tony Blair, speaking from Brussels, told BBC News "the very purpose of our strategy" was for UK troops to "step down" as the Iraqis "step up to the mark".
But he added the handover would happen "progressively, over time, as the Iraqis are capable of handling the security themselves and take responsibility for their own destiny and charge of their own country, which is what they want".
Iraqi Deputy Prime Minister Salam Zikam Ali al-Zubaie said: "There is an agreement to take over the security responsibilities from the British, Australian and Japanese forces in southern Iraq during this month.
"We hope that the Iraqi security forces will live up to their duties there.
"It is the dream of all Iraqis that our forces will handle security issues all over Iraq."