Iraqi Prime Minister Nouri Maliki has presented a national reconciliation plan to parliament aimed at stemming sectarian tensions and violence.
Observers say the plan could be a step towards reducing violence
The 24-point plan offers an amnesty to some insurgents, but not those from groups who have targeted civilians.
It outlines plans to disarm militias and beef up Iraqi security forces ahead of a takeover from coalition forces.
The announcement came as rebels linked to al-Qaeda said they had killed four Russian diplomats they were holding.
An internet statement by the Mujahideen Shura Council in Iraq said the executions were in revenge for "torture, killing and displacement by the infidel Russian government" in Chechnya.
On Monday, the group - a coalition of insurgents that includes al-Qaeda - said it would kill the Russians unless Moscow withdrew its troops from the republic. The four diplomats were seized in Baghdad on 3 June.
The BBC's Jim Muir in Baghdad says there are concerns that Mr Maliki's plan will not work as it does not seek reconciliation with those at the heart of the insurgency - the radical Islamists, many of them foreigners, who want Iraq to be the centre of a new Islamic empire.
Among the key proposals of Mr Maliki's plan is a review of the treatment of Baath party members forced out of public life after the US-led invasion in 2003.
Disgruntled Baathists and members of Saddam Hussein's disbanded military have long been seen as a source of funding and expertise to various strands of Iraq's insurgency.
Disarming Iraq's various militias also features prominently in Mr Maliki's plan. Sectarian militias, often tied to political parties, have come to control entire neighbourhoods in Baghdad and elsewhere.
In specific gestures to the disaffected Sunni community, he said amnesties would be offered to all those not guilty of serious crimes and committees would be set up to free them as soon as possible, provided they renounced violence.
Compensation will also be offered to former prison detainees "and those who were killed by Iraqi and American forces".
A new commission is to be set up to oversee the hoped for reconciliation process with branches in all of Iraq's provinces.
"The plan is open to all those who want to enter the political process to build their country and save their people as long as they did not commit crimes," Mr Maliki said.
Japanese troops have begun leaving Iraq
However, as he announced the long-awaited initiative Mr Maliki insisted it "should not be read as a reward for the killers and criminals or acceptance of their actions".
He made it clear that there was no place in the new Iraq for the Islamic radicals and hard core Baathists who are at the centre of the insurgency.
They, he said, would continue on what he called "Satan's path" and had to be confronted by all means. "There can be no agreement with them unless they face justice," he said.
The initiative received immediate endorsement from the leader of the biggest Sunni coalition in parliament, Adnan al-Dulaimi.
He urged all Iraqis to join in the effort to rebuild their country, but he called for the rapid release of detainees and a halt to raids and attacks on civilians' homes.
When he took power last month, Mr Maliki pledged to take control of Iraq's security situation from the US-led coalition within 18 months.
Reports from the US suggest military planners are aiming to reduce the numbers of troops in Iraq over the next 12 months, but no firm decision has yet been taken.
As Mr Maliki delivered his plan in parliament Japan began withdrawing its military vehicles from Iraq into Kuwait as part of its planned troop withdrawal.
Last week Japan announced that it would pull out 600 troops from the southern Muthanna province.