US troops have handed over control of Baghdad's Sadr City district to the government of Iraq.

Military leaders held a ceremony in the Iraqi capital on Saturday to mark the handover of responsibility in the city's predominantly Shia district.

The US departure is popular with residents, but it is yet to be seen whether sectarian violence will flare ahead of elections in January.

There is widespread support in Sadr City, formerly known as Saddam City and home to two million people, for the al-Mahdi Army militia lead by Muqtada al-Sadr, a vocal opponent of the US presence in Iraq.

Al-Mahdi Army fighters have been observing a ceasefire since heavy clashes with Iraqi forces in Basra and Baghdad in 2008.

Salah al-Obaidi, al-Sadr's spokesman, told Al Jazeera : "The withdrawal of American forces from Iraq is a very important step in order to develop the security situation inside Iraq to a better one.

"We are controlling the situation and will develop our abilities to rebuild Iraq."

'Fragile' situation

By the end of June, Iraqi troops will take over duties at 138 sites in Iraq's towns and cities formerly under the control of US soldiers.

Nuri al-Maliki, Iraq's prime minister, has described June 30 as a "blessed day" saying it will be a public holiday in celebration of the partial US withdrawal. It is also the anniversary of the 1920 revolt against the British occupation of Iraq.

"There may be some acts of violence and attempts to murder members of the Iraqi forces, but they stand ready," he said.

Samir al-Shamari, a 41-year-old civil servant, told the German Press Agency: "Yes, it will be a day for celebration, but the situation is still fragile.

"There are still great disagreements among the parties."

"They all will need to exert self-discipline and think of the greater good to avoid any surprises when the US soldiers leave."

The US military is due to leave the country by the end of 2011.