The fighting began with operations against militias in Basra
Iraqi Shia cleric Moqtada Sadr has ordered his fighters off the streets of Basra and other cities in an effort to end clashes with security forces.
He said in a statement that his movement wanted the Iraqi people to stop the bloodshed and maintain the nation's independence and stability.
The government called the move "positive", while the military said a curfew in Baghdad would end on Monday.
The fighting has claimed more than 240 lives across the country since Tuesday.
'Not one of us'
Iraqi Prime Minister Nouri Maliki had given militias until 8 April to surrender their weapons in return for cash.
But Hazem al-Araji, an aide to Moqtada Sadr, told journalists in Najaf the move would not mean handing in weapons.
The BBC's Adam Brookes in Baghdad says this means the Mehdi Army will remain intact and although the move gives Nouri Maliki a chance to claim victory, the central demand has not been met and this is not a resolution of the conflict.
The cleric's statement said: "Because of the religious responsibility, and to stop Iraqi blood being shed, and to maintain the unity of Iraq and to put an end to this sedition that the occupiers and their followers want to spread among the Iraqi people, we call for an end to armed appearances in Basra and all other provinces.
"Anyone carrying a weapon and targeting government institutions will not be one of us."
Moqtada Sadr told followers to "work with Iraqi government offices"
The cleric also demanded that the government apply the general amnesty law, release detainees and stop what he called illegal and random raids.
Moqtada Sadr also told his followers to "work with Iraqi government offices to achieve security and to file charges against those who have committed crimes".
A spokesman for Mr Maliki, Ali al-Dabbagh, told Iraq television the statement was positive.
"As the government of Iraq we welcome this statement. We believe this will support the government of Iraq's efforts to impose security."
He also warned: "The government will be forced to implement the law against those who do not obey the instructions of the government and of Sadr."
A spokesman for the interior ministry, Maj-Gen Abdul Karim Khalaf, said government operations in Basra would continue, but would target "criminals".
In Baghdad, state television announced that a round-the-clock curfew would be lifted at 0600 (0300GMT) on Monday, although a vehicle ban will remain in force in three Shia areas in the city.
The curfew had been extended indefinitely on Saturday night, after a day of skirmishes between security forces and Shia militiamen in the capital and Basra.
Coalition forces had become more involved, with US air raids in the two cities in recent days.
Estimates vary of the number of deaths since the fighting broke out.
Fighting in Baghdad has left 117 people dead over the past three days, Iraqi police told the BBC.
In Basra, the British military has given a death toll of 50 but local medical sources report as many as 290 dead and the Iraqi army has reported killing 120 "enemy" fighters there.
Scores of people are believed to have been killed in other southern cities, according to Iraqi police or medical reports.
At least 44 people were killed in and around Kut, 15 in Nasiriya, 12 in Karbala and six in Hilla.