Iraqi President Jalal Talabani has designated Jawad al-Maliki, a Shi'ite, as prime minister and asked him to form a government.
The move on Saturday breaks a four-month political impasse over the nomination of prime minister.
U.S. Secretary of State Condoleezza Rice said on Saturday that Iraq has reached an "important milestone" in the formation of its government. President Bush is to comment on the developments shortly.
Mr. Talabani made the announcement during a parliament session that approved several nominations for government posts.
In the session, Mr. Talabani, a Kurd, was elected to another term as president, while a Sunni Arab, Mahmoud al-Mashhadani, was elected parliament speaker.
In other developments, the U.S. military announced the deaths of five U.S. soldiers, including four who were killed Saturday by a roadside bomb south of Baghdad.
It said the fifth soldier also died from a roadside bomb south of Baghdad, but did not specify if it was the same attack that killed the others.
Elsewhere, two people were killed and at least 10 others wounded when two roadside bombs exploded within minutes of each other near Baquba.