The new commander of US forces in Iraq, Lt Gen David Petraeus, has assumed control ahead of a fresh push to quell violence in Baghdad.
The success of Bush's strategy rests with Gen Petraeus
Gen Petraeus will oversee President George W Bush's security plan, under which 21,500 extra US troops are being sent to Iraq.
Gen Petraeus, a veteran of the Iraq conflict, said his task was "hard but not hopeless" at a ceremony in Baghdad.
Hundreds of Iraqis have been killed in bombings in Baghdad already this year.
The BBC's Andrew North, reporting from US Camp Victory in west Baghdad, says the ceremony took place in a marbled palace once occupied by Saddam Hussein and with his initials still on the decorated ceilings and walls.
LT GEN DAVID PETRAEUS
1974: Graduated from West Point Military Academy
2003: Commanded 101st Airborne Division during invasion of Iraq
2007: Named new US commander in Iraq
In effect this marks the real start of the new US strategy in Iraq, but is also seen as a last chance to turn things around, our correspondent says.
General George Casey, the outgoing commander now promoted to US Army chief of staff, emphasised an approach of trying to hand over more quickly to Iraqi security forces.
But Gen Petraeus is overseeing the deployment of more American troops because of the failure so far of Iraqi units to deal with the sectarian violence.
A short time after the ceremony, a car bomb exploded outside a bakery in Baghdad's Karrada district. At least five people were killed and 10 injured.
The US military also announced that three of its soldiers had been killed in an explosion north-east of Baghdad on Friday.
The military said the explosion happened as troops were searching a building in Diyala province. Four other soldiers were wounded.
The BBC's Jane Peel in Baghdad says Gen Petraeus's chances of success could be helped by an apparently changed attitude from Iraqi Prime Minister Nouri Maliki.
Mr Maliki has promised that all those involved in the violence will be legitimate targets, our correspondent says.
In the past, his Shia-dominated government has been accused of protecting the Shia militias.
No-one in Baghdad expects an overnight transformation, but both the Iraqis and the Americans are desperate for some early and tangible results, our correspondent adds.
US and Iraqi forces have been carrying out a low-level offensive against Shia militias in the capital for weeks, seen as a prelude to a major campaign.
The new offensive will involve US and Iraqi forces, thousands of whom are already on the ground, sweeping Baghdad for militants and illegally held weapons, US military officials say.
The Iraqi government has said it will announce guidelines for the new plan in the coming days.
However Mr Bush's plan continues to face considerable opposition both from Democrats and members of his Republican party, who want an earlier transfer of security to Iraqi leaders.