The Paris Club of international creditors has agreed to cancel 80 percent of the debt Iraq owes member countries.
Officials say the deal, brokered in Berlin, is worth about $33 billion. Club officials were set to make a formal announcement in Paris later Sunday.
The United States had sought as much as a 95 percent debt reduction as part of a strategy aimed at increasing the chances of survival for the post-war Iraqi government.
For its part, France had sought to have member countries initially waive 50 percent of the debt and then review the matter in three years.
Paris had argued that slashing the debt by more than 50 percent was unfair to other poor, debt-ridden nations that lack the potential oil revenues of Iraq.
Some information for this report provided by AP and Reuters.