Iraq government backs amnesty
Parliament must debate the law on Sunday before it is ratified.
The number of prisoners held by US and Iraqi forces, estimated at 50,000, has risen sharply after the recent "surge" strategy, boosting military operations.
Vital step
The strategy of injecting extra US troops to work alongside local tribal militias - many of them former insurgents - has been credited with a drop in violence this year.
The US military surge has also seen a steep rise in the number of prisoners, with entire neighbourhoods sometimes being taken into custody.
The general pardon law has taken months to prepare and is regarded as a vital step towards reconciling Sunni and Shia groups.
Sunni political leaders in particular have been calling for the release of the many suspected insurgents from their community being held in custody.
The law is believed to provide for the release of most prisoners who have been held without charge.
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