Iraqi President Jalal Talabani says the Shia militia known as the Mehdi Army has stopped its activities on the orders of its leader, Moqtada Sadr.
Moqtada Sadr has reportedly ordered his followers to stand down
The president described this as a positive response to the six-week-old Iraqi-US security push in Baghdad.
He was speaking after receiving the new US ambassador to Iraq, Ryan Crocker, who expressed hope for progress towards stability and prosperity.
Many of the bombings in the country are blamed on Sunni insurgents.
Meanwhile, there are conflicting reports about the number of people who were killed in two suicide truck bomb attacks in the northern town of Tal Afar on Tuesday.
The interior ministry said 152 people died, making it the deadliest single attack of the insurgency.
But the figure was disputed by the mayor of the town, and dismissed by the US, which said the official count was 83 dead.
Iraqi spokesman Brig Abdul Kareem Khalaf explained the delay in raising the death toll, saying 100 homes had been destroyed in the main blast.
"It took us a while to recover all the bodies from underneath the rubble of the homes... what did they achieve by using two tonnes of explosive to kill and wound 500 in a residential area?"
The bomb attacks sparked a series of reprisals, apparently by Shia policemen, in which dozens of Sunni men were taken from their homes and shot dead.
Reuters agency said vehicle and suicide bombings had killed 400 people in Shia areas across the country in the past week.
Analysts say the bombing campaign has continued largely unabated since the Baghdad security crackdown began. Reprisals by Shia militias on Sunnis, however, have reportedly fallen.
The Mehdi Army is one of the groups blamed for such attacks. It has been described by the US as the greatest threat to security in Iraq.
Mr Crocker is hoping for stability, prosperity and friendship
"People now are co-operating with government forces against terrorism as part of the security plan," Mr Talabani said.
"Not to mention the fact that the Mehdi Army has become inactive.
"Apparently the instructions of brother Moqtada Sadr have been effective, whereby there are no longer complaints by brother Sunni Arabs about attacks against them like before."