Iraq's parliament overwhelmingly approved a provincial elections law Wednesday, setting a Jan. 31 deadline for the vote, which would give increased power to the country's regional communities.

The legislation comes after months of deadlock stemming from a complex dispute between Arabs and Kurds over power sharing in the oil-rich city of Kirkuk, which Kurds seek to incorporate into their semiautonomous region.

In what is viewed as a compromise, Tamim province, which includes Kirkuk and three other provinces in the northern Kurdistan region, are exempted from the agreement.

Voters will choose provincial councils for the other 14 provinces, which wield considerable power at the local level.

Agreement was reached after Shiite, Sunni, Kurdish and Turkmen lawmakers adopted a UN compromise to form a parliamentary committee to review disputes regarding Kirkuk separately so the elections can be held in 14 other provinces.

The new law requires the committee to make recommendations for separate legislation on Kirkuk elections by March. The law also banned political parties from using religious authorities, mosques and government institutions as part of campaigning.

Kirkuk now 'symbol of Iraqi unity'

U.S. officials have complained privately that Iraqi politicians have failed to take advantage of the sharp drop in violence – down 80 per cent since last year, according to the U.S. military – to forge lasting power-sharing agreements.

But parliamentary Speaker Mahmoud al-Mashhadani, a Sunni, said the law's passage showed that Iraq's fractured ethnic and religious groups could work together.

"In the past, Kirkuk was the mother of all troubles, but today it has become the symbol of Iraqi unity," he said.

The measure still needs to be approved by the three-member presidential panel led by President Jalal Talabani, himself a Kurd who vetoed the last attempt by parliament to push through a measure despite a Kurdish walkout.

But Kurdish legislators agreed to the latest proposal, suggesting presidential approval was more likely.

Parliament aimed for Oct. 1 vote

The Iraqi Parliament had hoped the vote would proceed as early as Oct. 1, but then pushed the date to the end of December due to disagreements between rival Kurd, Arab and Turkmen factions over the Kirkuk election process.

Lawmakers acknowledged the delay in passing the measure would make it difficult for the electoral commission to organize the vote and pushed back the deadline for it to be held until Jan. 31.

U.S. and Iraqi officials believe the elections are an essential step to building a long-term peace among the country's rival religious and ethnic communities.

UN envoy Staffan di Mistura, who has shuttled relentlessly between the political blocs to pressure them to approve the law, told the Associated Press that preparations for the vote would begin immediately.

"Today is an important day for Iraq and democracy as the parliament found a compromise over election law," he said. "This will help Iraq and Iraqis to express their opinions by voting for their candidates in the provinces."

Many Sunnis and some Shiites boycotted the last provincial election, in January 2005, enabling Shiite religious parties and the Kurds to win a disproportionate share of power.