Iraq's cabinet has approved a draft oil law which aims to equitably share revenues from its oil revenues among the country's ethnic groups.
Iraq's oil industry has suffered amid the ongoing conflict
The bill - allocating oil revenues between Iraq's 18 provinces based on their population levels - must now be submitted to parliament for a vote.
Prime Minister Nouri Maliki called the deal a "gift to all the Iraqi people".
The sharing of oil money is a major bone of contention between Iraq's Shia majority and Kurds and Sunni Arabs.
Iraq has the world's third-largest oil reserves.
Most of the oil fields are in the Shia-dominated south, while the best prospects for future drilling are in the Kurdish north.
In the 20th Century, political power - and control of oil revenues - lay with Iraq's Sunni Arab rulers, whose community is more numerous in the densely populated central provinces.
Divisions between the ousted elite and newly-empowered Shias and Kurds have erupted in intense political rivalry and sectarian bloodshed.
Analysts say the hope is that an oil law will foster much-needed unity in Iraq, considered by many to be on the brink of civil war.
The decision to back the draft law came two months after the government's own deadline for the legislation to come into force.
It was approved by the cabinet after Kurdish members backed the proposal at the weekend - dropping a long-held insistence on Kurdish autonomy in oil exploration and production.
"This law has been based on our national interest," Mr Maliki said.
"It will encourage the bringing together of all component parts of the Iraqi people," he told a news conference.
The draft law also lays out method for international companies to invest in Iraq's oil industry, reports say.
Foreign investors have stayed away from Iraq during the past four years of violence and uncertainty.
Iraq has an estimated 115bn barrels of accessible oil reserves, putting it behind only Saudi Arabia and Iran.
Production has fallen since the US-led invasion, from 3.5m barrels per day to approximately two million.