The comments came as some 1,000 US and Iraqi troops who have encircled the city for more than two weeks, said they were prepared for action if ordered.

Iyad Allawi "has agreed to a proposal by certain members of the National Council (Iraq's interim parliament) to find a peaceful solution" to the stand-off in Fallujah, said council member Ahmad al-Barrak.

"Allawi said he did not have any objections but that this would be the last attempt" at mediation before a possible military assault against the Sunni Muslim bastion, he told AFP.

Talks between the US-backed interim government and delegates from the Sunni Muslim hotspot collapsed in mid-October after Allawi ordered the city to surrender Iraq's most wanted man, Abu Musab al-Zarqawi, and other suspected Al-Qaeda-linked militants or face invasion.

City leaders, however, insist that the Jordanian-born Zarqawi, wanted for a string of deadly attacks and beheading of hostages in Iraq, does not reside there.

Since October 14, US and Iraqi forces have ringed Fallujah, where the military has repeatedly launched air strikes and some limited ground incursions.

"The 1st Marine Expeditionary Force is prepared to do anything that the Iraqi interim government asks us to do," said Major Francis Piccoli.

The troops were ready to stand down, maintain their positions or increase their "security operations," he said, using a military term for conducting searches, setting up check-points and detaining suspects.

"We have been gearing up for a major operation since April," said Piccoli.

The marines had their sights set on Fallujah, 50 kilometres (30 miles) west of Baghdad, and its sister town of Ramadi -- both notorious flashpoints of insurgenct activity against US troops and Iraq's new security forces.

"For the 1st MEF, Fallujah and Ramadi are big concerns right now," Piccoli said.

The marines wanted to help ensure the two towns are ready for national elections promised by January, with a registration process for voters and candidates due to start at the beginning of November, added the major.

A spokesman for the prime minister's office said the delegation "may be the last chance" to rid the city of insurgents and convince people to hand over heavy and medium weapons.

"Allawi has asked the leaders of Fallujah to help the Iraqi police and national guard with the assistance of the (US-led) multinational forces" to rid the city of rebel fighters, he said.

"We are ready to start the reconstruction of Fallujah," the spokesman added.

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