UK Foreign Secretary David Miliband has said he is "delighted" by Iraq's announcement that its forces will take control of Basra province in December.
Gordon Brown plans to reduce UK troops to 2,500 by next spring
The move is "firmly in line with the coalition's progressive handover strategy across Iraq", he said.
He added this did not signal the end of UK troops' commitment to Iraqi people.
Since the end of the war in April 2003, UK troops have been helping to restore essential infrastructure and services and provide security in Basra.
"We are delighted that the Government of Iraq has announced its intention to transfer security responsibility for Basra province to the Iraqi authorities in December," Mr Miliband said.
"We congratulate all of those who have helped achieve this, most notably British and coalition military and civilian personnel," he added.
"Their dedication and bravery have brought stability to the province and has given the Iraqi Security Forces the training, support and confidence they need to take on responsibility for the safety and security of their own people."
Mr Miliband added the UK operation in Iraq "now enters a new stage".
Following December's formal handover ceremony, UK troops intend to continue to train and mentor the Iraqi Security Forces.
"But the Iraqis will take the lead, as they have proved more than capable of doing in Muthanna, Dhi Qar and Maysan," Mr Miliband said.
Earlier in October, Prime Minister Gordon Brown set out plans to reduce UK troop numbers to 2,500 from next spring.
There would be "two distinct stages" in the handover of Basra, the prime minister said.
The first would see British soldiers focus on training Iraqi security forces, before they assumed a more limited ability to intervene with force.