The militia is weakened after many battles with US and Iraqi forces
A spokesman for Iraqi Shia cleric Moqtada Sadr says his militia will no longer carry weapons, but he stopped short of declaring an end to violence.
In a BBC interview, Salah al-Obeidi said future decisions about the Mehdi Army's strategy would depend on the long-term status of US troops in Iraq.
"Resistance" would go on if a timetable for US withdrawal was not set, he said.
Iraq and the US are negotiating a status of forces agreement to decide the future role of US troops.
An announcement is expected to be read out at prayers in many Shia mosques in Baghdad on Friday.
The BBC's Crispin Thorold in Baghdad says the Mehdi Army was once arguably the most powerful Shia military and political movement in Iraq, but it has been seriously weakened after military operations against it.
Local ceasefires were declared in Basra and Baghdad earlier this year after intense fighting, but the militia still retains its weapons.
In June, the militia announced a reorganisation along the lines of Hezbollah in Lebanon - turning it into a large social movement with small secretive fighting units.
Separately, Iraqi Prime Minister Nouri Maliki has given militants in Diyala province, north of Baghdad, a week to lay down their arms.
He said those that did so would receive an amnesty.
So far, almost 500 suspected militants have been captured in an offensive there over the past eight days.