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US Defence Secretary Robert Gates has told US troops in Iraq that their mission there is in its "endgame".
Mr Gates said the US military presence would undergo a "significant change of mission" next June when troops are due to withdraw from Iraq's urban areas.
Under a recently agreed deal between the two countries, US troops will completely withdraw from Iraq by 2011.
However, the US general leading US troops in Iraq has said he expects some soldiers to stay in cities beyond June.
The Iraqi parliament voted in favour of the new security deal with the Americans last month. Iraq's government has hailed the agreement as the prelude to the return of full sovereignty to the country.
Speaking to US troops at an air base north of Baghdad, Mr Gates said the process of reducing troop numbers had already begun.
He said President-elect Barack Obama had "talked about wanting to listen and hear from commanders on the ground".
"We are in the process of the draw down. We are, I believe, in terms of the American commitment, in the endgame here in Iraq."
Regarding the date of urban withdrawals, he said: "That represents a really significant change of mission, and it calls for us to have all of our combat units out by the end of 2011."
He said the US had suggested the June date because commanders believed they would have turned over all 18 provinces to provincial Iraqi control by then.
Also at the air base, General Ray Odierno, the US military commander in Iraq, said some troops would remain in Iraqi cities to advise and train Iraqi forces, rather than take part in combat.
As training at local security stations is part of the deal, Gen Odierno said: "We believe we should still be inside those after the summer."
He did not specify how many of the current 150,000 US military personnel deployed in Iraq would remain.
He highlighted elections due to be held next year, saying: "It's important that we maintain enough presence here that we can help them get through this year of transition.
"We don't want to take a step backward because we've made so much progress here."
Meanwhile, the Iraqi PM has dismissed comments from a government spokesman that US troops could remain for a decade.
The government spokesman, Ali al-Dabbagh, has provoked controversy by doubting the ability of Iraq troops to take over in three years, saying the Americans might need to stay for 10 years.
Iraqi Prime Minister Nouri al-Maliki has been forced to issue a statement disowning Mr al-Dabbagh's comment.
He said the spokesman had simply been giving his personal opinion, and that the notion that the Americans would stay in Iraq for a further decade was not the government's view.
Opponents of the new security plan, including the anti-American Shia cleric Moqtada al-Sadr, say they do not believe the Americans will withdraw by the dates they have promised to - and insist they should leave Iraq immediately.