NAJAF, Iraq -- Iraq's newly appointed prime minister yesterday announced that nine private Iraqi militias had agreed to disband, with their estimated 100,000 armed followers to be folded into the Iraqi army or converted to civilian service, and that all private armies would be banned.

The announcement was seen as a significant step toward extending the control of the central government that will take power at the end of the month while reducing the threat of civil war after the U.S.-led occupation formally ends.

"Those who choose violence and non-compliance with the law, we're going to deal with them decisively in accordance with this law," Prime Minister Iyad Allawi said.

The agreement includes some 70,000 Kurdish pesh merga warriors loyal to the two main pro-American Kurdish parties that control a semi-autonomous section of northern Iraq. But it does not include most of the Shiite militias which sprang up in the south following the collapse of Saddam Hussein's government last year, including those controlled by radical cleric Muqtada al-Sadr.

Sadr's Mahdi Army has been leading a sporadic nationwide uprising against the U.S.-led occupation of Iraq for two months, which began when U.S. forces shut down his newspaper and sought his arrest on charges of murdering a rival cleric.

U.S. officials say the Sadr rebellion is largely quelled, although a number of Sadr loyalists continue to bear arms and vow to fight against U.S. forces.

Most of the militias covered by the agreement were organized to fight Saddam. Under the program, the estimated 100,000 fighters will be treated as veterans -- eligible for government benefits including pensions and job placement programs depending on their time in service.

Besides the Kurds, the main militia taking part in the agreement is the 15,000-member Badr Brigade, a Shiite group controlled by the Supreme Council for the Islamic Revolution in Iraq. The council had balked at disbanding the brigade after its leader, Grand Ayatollah Mohammed Baqir al-Hakim, was assassinated last year in Najaf.

Yesterday, a top council official, Dr. Haitham al-Husseini, said, "We want to disband the Badr Brigade and to enable its members to join the new Iraqi army and police forces and serve the new Iraq."

Meanwhile, it remains to be seen whether Sadr's militia will fade into the background.

"Muqtada militia fighters have virtually disappeared from the streets, including in the old city of Najaf," said Dan Senor, U.S. spokesman for the Coalition Provisional Authority.

But despite a shaky truce between Sadr and coalition forces announced two weeks ago, the football-field sized space allotted for Sadr's troops at the Valley of Peace cemetery in the holy city of Najaf continues to fill up fast. "The martyr Kalem Jawad Bahri died in Babylon on May 17, 2004," reads one tombstone.

Amir Hassan al-Heili, a 29-year-old Sadr militiaman holding a rocket-propelled grenade launcher on a Najaf street corner yesterday, said, "We saw some American tanks ... inside the borders" of the city. "We have the authorization to attack them."

Ali Abbas Mohammad, a 17-year-old from Karbala with a Kalashnikov hanging from his shoulder, walked gingerly through the ancient burial grounds where American tanks had killed dozens of Sadr militiamen and damaged countless graves.

"We've decided not to leave Najaf," he said. "We've decided to stay and to either die for the sake of the holy shrines or be victorious."

Down the road in the nearby city of Kufa, a column of white smoke billowed from the main mosque, the site where the Shiite saint Imam Ali, the Prophet Mohammad's son-in-law, preached centuries ago. Fire trucks and armed men raced to the scene. Gunfire erupted.

"We're not sure yet whether the explosion was caused by an American missile or American infiltrators," said Hosam al-Hosseini, a Sadr spokesman.

Police had a different explanation for the blast: Sadr followers inside the mosque were fidgeting with explosives and munitions. "Iraqi police who tried to render assistance were fired on by unknown attackers within the mosque," the U.S. military announced.

Still, with U.S. forces largely keeping their distance from the center of the city where the Imam Ali shrine is located, the Najaf area has calmed. Despite the hundreds of young men who died fighting the Americans, Hosseini said Sadr's forces had scored a great victory over America.

"We consider it a victory because the Americans entered Fallujah after three weeks," he said. "Here it's six weeks and the U.S. still has not occupied Najaf."

Hosseini's mobile phone rang. An American convoy had been attacked near Baghdad, leaving an American soldier dead. The 34-year-old, wearing the black turban denoting him as a descendant of Muhammad, chain smoked and excitedly took notes. His 35-year-old colleague, Sheikh Ahmad Shabani listed the uprising's other accomplishments.

"The Americans came here and negotiated with us," he said during a chat in an air-conditioned lounge inside the Imam Ali shrine, where the cleric and his followers are ensconced.

"We forced the Americans to change the government and change the cabinet."

Back outside in the blistering mid-day heat, Sadr fighters continued to roam the streets, hungering for martyrdom. Heili, the 29-year-old with the RPG, said his mother wouldn't shed any tears if were killed by American soldiers.

"When I die my mother will give out chocolates at my funeral," he said.