Baghdad and the mainly Shiite south have been gripped by four months of anti-government rallies demanding snap elections, a politically independent prime minister and accountability for corruption and protest-related violence.

Prime Minister Adel Abdel Mahdi resigned in December but political factions had been unable to agree a replacement.

Frustrated by the delays and worried about further instability, President Barham Saleh gave political blocs until Saturday to nominate a new premier, sending them into crisis talks that produced a consensus on Allawi.

On Saturday evening, Allawi addressed Iraqis on state television, pledging to form a representative government, hold early parliamentary elections and ensure justice for protest-related violence -- all key demands of protesters.

More than 480 people have died and nearly 30,000 have been wounded in protest-related violence since October but few have been held accountable for the bloodshed.

"This nomination places a huge, historic responsibility on my shoulders," Allawi said in his formal address.

He had earlier posted a video to Twitter announcing the nomination.

"I will ask you to keep up the protests, because if you are not with me, I won't be able to do anything," Allawi said, addressing the camera in colloquial Iraqi dialect.

The president's office published photographs of Saleh sternly handing a smiling Allawi the nomination papers.

Outgoing prime minister Abdel Mahdi congratulated his successor and the United Nations welcomed the move.

"The prime minister-designate faces a monumental task," said the UN's top official in Iraq, Jeanine Hennis-Plasschaert.

"The United Nations has called time and again on all stakeholders to rise above partisanship and place the national interest first. Now is the time to act."

- Protesters split -

Allawi's nomination came after three days of intense talks over a shortlist of candidates, with senior government officials skeptical about a nomination until the evening.

The contenders needed a green light from a dizzying array of interests -- the divided political class, the Shiite religious leadership, neighbouring Iran, its rival the United States as well as the protesters.

One of the most influential political figures is Shiite cleric Moqtada Sadr, who led the anti-US Mehdi Army militia after the invasion of Iraq in 2003 and has since refashioned himself as a populist politician.

He controls parliament's largest bloc and many ministerial posts but backed the protests when they erupted in October.

Sadr immediately threw his weight behind Allawi.

"This is a good step," the cleric wrote on Twitter.

"I hope the president's appointment of Mohammad Allawi is acceptable to the people and that they have patience."

But protesters across Iraq were unconvinced.

Within minutes of the announcement, many in Baghdad's main protest camp of Tahrir Square began chanting "Allawi is rejected, Allawi is rejected!"

Demonstrators hit the streets in the holy city of Najaf, pledging to escalate their movement further as Allawi was not the independent they had long demanded.

"Mohammad Allawi's nomination came with the approval of the same corrupt political blocs we've been protesting against for over four months," said lawyer Hassan Mayahi, marching in the southern hotspot of Diwaniyah.

And in Nasiriyah, whose non-stop protests have made it Baghdad's sister city in the anti-government movement, demonstrators sealed off two bridges with burning tyres in outrage at Allawi's nomination.

- Challenges ahead -

Allawi, a 65-year-old Shiite Muslim, served as communications minister twice under former PM Nuri al-Maliki but resigned both times, alleging corruption and interference in personnel appointments.

Maliki, who still holds sway in Iraq's parliament, is said to have rejected his candidacy but other political blocs came to an agreement amid pressure by the president.

According to the constitution, Allawi has one month to form a cabinet, which will be put to parliament for a vote of confidence.

Much like the premier's nomination, the cabinet is typically formed by consensus among Iraq's political rivals after intense horse-trading over influential posts.

Allawi pledged to resist such bartering, saying in his formal address on Saturday that he would reject any ministerial candidate put forth by political parties and would build a cabinet based on competence, not connections.

He will oversee early parliamentary elections under a new electoral law passed last year and attempt to navigate Iraq through the geopolitical storm brewing between Iran and the US.

Both are close allies of Baghdad but have been at loggerheads since Washington abandoned the landmark 2015 nuclear deal with Tehran and imposed a series of crippling sanctions.

The US embassy in Baghdad issued a carefully worded statement on Saturday, saying it hoped Allawi's nomination would lead to "an independent and honest government committed to addressing the needs of the Iraqi people."

There was no immediate statement from Iran.