By Jim Muir
BBC News, Baghdad
The Iraqi government is to encourage Arab settlers in the city of Kirkuk in the north of the country to return to their original homes further south.
Kirkuk has seen a spate of bombings in the last four years
The measure is called for in an article of the new Iraqi constitution dealing with the ethnically mixed city.
During Saddam Hussein's rule, Arabs were settled in the oil-rich province at the expense of Kurds and Turkomans.
A referendum on joining the other three provinces recognised as Iraqi Kurdistan is to be held this year.
Kirkuk is one of the most emotionally charged and potentially explosive issues in Iraq.
The Kurds see it as their natural capital. They want to see the oil-rich province attached to Iraqi Kurdistan - an idea resisted by many Arabs and Turkomans.
Article 140 of the new constitution sets out procedures which the Kurds hope will achieve their goal.
It envisages a referendum before the end of the year, but first a normalisation process whereby parts of the province hived off by Saddam Hussein would be returned.
Arabs from the south settled there by him would be encouraged to return to their original homes and Kurds, Turkomans and others who were driven out allowed to come back.
Now the cabinet has approved proposals for the Arab settlers to be offered inducements to move out.
They are to be given the equivalent of $15,000 each plus a plot of land in their place of origin.
The process is supposed to be entirely voluntary. Application forms are to be distributed for those who want to take part.
But Sunni Arabs and others in the Iraqi cabinet opposed the step and tensions are rising on the ground in Kirkuk itself, where violence has been mounting.
Neighbouring Turkey, which regards itself as the guardian of Iraq's Turkoman minority, has also warned of the consequences of a Kurdish takeover of Kirkuk.