All but a few U.S. soldiers must leave cities, towns and villages by June 30, marking a milestone moment as Iraq reasserts its sovereignty six years after the U.S. invasion.
Here are some issues to watch going forward:
WILL AL-QAEDA TAKE ADVANTAGE?
Prime Minister Nuri al-Maliki's Shi'ite Muslim-led government blames Sunni Islamist insurgents, including al Qaeda, for the bombings of mostly Shi'ite targets in the past months.
Those included the two deadliest attacks for more than a year -- 73 killed on June 20 outside a mosque near Kirkuk, and Wednesday's bombing in the capital's Sadr City slum -- making some Iraqis fear they are just a sign of things to come.
There is little doubt that the insurgents will try to exploit any vacuum left after the U.S. pullback, but their popular appeal and logistical base has been sharply reduced.
"There is no way to stop every bomber. But strong and wise leadership should be able to prevent the kind of lethal revenge cycle in 2005 that culminated in civil war," said Joost Hiltermann of the International Crisis Group (ICG).
And while most U.S. combat troops are pulling out of towns, some will stay to train and advise Iraqi forces. They include special forces, and units running aerial surveillance drones, which are expected to be among the last to leave the country.
Outside the cities there are no restrictions on U.S. combat operations, though they must be coordinated with Iraqi authorities, as they have had to be since the start of the year.
"So the pressure will be kept up on al Qaeda," said Tim Ripley, an analyst with Jane's Defence Weekly Magazine.
ARE IRAQI SECURITY FORCES READY?
The performance of the Iraqi forces has been varied. In volatile, ethnically-mixed areas like Kirkuk and Mosul, U.S. troops have often been viewed as the only neutral party.
"This clearly is a major question mark," said Wayne White, Middle East Institute adjunct scholar and former deputy director of the U.S. State Department's Middle East Intelligence Office.
"The majority of (the Iraqi army's) manoeuvre elements are predominantly Shi'ite, and some of those have been known to take sides against Sunni Arabs especially. Consequently, there is considerable anxiety among Sunni Arabs in particular regarding the departure of U.S. troops and greater U.S. over-watch."
Analysts say some Iraqi units have impressed, like during last year's "Charge of the Knights" operation against militants in the southern city of Basra. But tackling hardcore insurgents will require top notch intelligence and quick raiding skills.
"Fortunately, I think we can still help with that despite 'pulling out of the cities'," said Michael O'Hanlon, specialist in U.S. security policy at Washington's Brookings Institute.
"We won't be far away, and in fact we will still be within the cities in modest numbers ... So I believe this is more gradual and seamless of a process than the hard June 30 deadline implies and therefore am relatively confident."
WHAT IF VIOLENCE SURGES?
The Iraqi government could always ask for a change in the U.S. withdrawal timetable. But this would be a bitter pill for Baghdad to swallow, since it has talked up its own abilities.
Seeking support from elsewhere, such as Iraq's Shi'ite neighbour Iran, might be just as unpalatable, said David Mack, scholar at the Middle East Institute in Washington and a former U.S. deputy under secretary of state for near east affairs.
There is no guarantee, though, that Iraq would turn again to the United States.
"There is a danger for both Iraq and the United States that, faced with a renewed Sunni Muslim insurgency and Kurdish separatist pressures, the Maliki government would accept Iranian help in the security area," Mack said.
U.S. President Barack Obama's administration is constrained by domestic political and financial concerns, but would not want to lose the last two years' hard won security gains. It will still have 100,000 troops in Iraq, and significant aerial power.
"They could re-enter the arena," said Paul Rogers, professor of peace studies at Britain's Bradford University.
"If they did, then it would be with as low a profile as possible, relying mainly on air power and less on boots on the ground, even with the risk of collateral damage this entails."
WHAT ABOUT JANUARY'S ELECTION?
Many observers see Iraq's most crucial milestone being the parliamentary election next January, rather than the withdrawal of U.S. soldiers from town and cities by the end of this month.
That vote will be a defining test of whether the country's feuding factions can live together after the years of sectarian bloodshed unleashed by the 2003 U.S. invasion.
"Security gains in a narrow sense will be of limited value unless the ... election is turned into a thoroughly inclusive affair where Iraqis get the opportunity to discuss fundamental issues of national reconciliation in an open atmosphere," said Reidar Visser of the Norwegian Institute of International Affairs and editor of Iraq-focused website www.historiae.org. (Editing by Michael Christie and Samia Nakhoul)
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