Najaf, Iraq ? U.S. officials embraced a peace plan here Thursday offered by fundamentalist cleric Muqtada al-Sadr, raising hopes for an end to weeks of fighting between his militia and American troops that has left hundreds dead and damaged shrines.

Al-Sadr, whose Al Mahdi militia seized control of key parts of Najaf last month, unveiled a four-point proposal brokered by moderate Shiite leaders that calls for him to relinquish control of government buildings and send some of his armed followers home.

In return, U.S. forces would pull back to a few small bases in Najaf and the neighboring city of Kufa, and would be gradually replaced by Iraqi police.

Decisions about the future of the militia and whether al-Sadr would have to surrender to face criminal charges that he plotted the slaying of a rival would be made later by Shiite Muslim leaders, not by the United States.

“This is happy news to save the blood of our people and a victory for the forces of democracy,” said Mouwafak Rabii, Iraq’s national security adviser, who helped draft the plan.

The tentative peace deal represents a significant compromise for the United States, which amassed 2,000 troops outside Najaf in April with the stated objectives of “killing or capturing” al-Sadr and “crushing” his militia.

If accepted, the plan would allow al-Sadr to remain free in Najaf for the time being and clear the way for him to transform his militia into a legitimate political party.

It marks the second time in recent weeks that American officials have found it necessary to make concessions from their original aims in order to end the bloodshed.

In the battle over the Sunni Muslim stronghold of Fallujah, U.S. officials dropped demands that insurgents there be “pacified” and surprised many by pulling out of the city and handing over authority to a former general in Saddam Hussein’s army. U.S. troops entered that city after the killings and mutilations of four American contractors. As in Najaf, the fighting left many civilians dead.

The Najaf offer reflects growing pressure on the United States by mainstream Shiite leaders, including Grand Ayatollah Ali Sistani, to end the standoff, and a desire to bring stability in Iraq as the U.S.-led Coalition Provisional Authority prepares to transfer sovereignty to an interim government.