President Barack Obama sketched the outlines of a new US-Iraqi relationship saying it was time to broaden the ties forged out of war.

"The United States and Iraq have known difficult times together. Now both of us agree that the bonds forged between the US and Iraqis in war can pave the way for progress that can be forged in peace," Obama said.

Standing beside Obama in the White House Rose Garden, Iraqi Prime Minister Nuri al-Maliki announced plans for a foreign investor conference in October.

"All of this comes as a natural reaction to the stability and to the direction of the Iraqi national unity government to provide what is needed for rebuilding, reconstruction of a country that was destroyed by wars, by dictatorship," Maliki said.

Three weeks after US troops withdrew from Iraqi towns and cities, paving the way for a full withdrawal by the end of 2011, both Washington and Baghdad are eager to show their relationship is moving into a new phase that will emphasize non-military cooperation.

US forces invaded Iraq in 2003 to topple Saddam Hussein and 130,000 troops remain to help secure the country and train Iraqi forces. Some 4,300 US soldiers have been killed during six years of insurgent and sectarian conflict. Tens of thousands of Iraqis have died and millions displaced.

Maliki's first meeting with Obama at the White House came at a critical time in US-Iraqi relations. Both Washington and Baghdad want to start normalizing ties and move away from a relationship dominated by security issues.

The Iraqi prime minister's visit to the US aims to demonstrate Iraq's independence from Washington, encourage foreign investors to return, and renew pressure for the United Nations to lift punitive war reparations measures.

Maliki's Shi'ite Muslim-led government is courting foreign investors to help resurrect an economy ground down by decades of sanctions, neglect and war.

He is touting Iraq's improved security. But, underscoring the difficulty of his task, gunmen shot dead five pilgrims travelling in a bus convoy, a day after bombs exploded across Baghdad, killing 16 people.

Iraq is riven by ethnic and sectarian divisions among majority Shi'ites, Sunnis and Kurds. The Obama administration is worried about the slow pace of political reconciliation, a US priority.

Both Obama and Biden have called on Iraqis to settle potentially explosive disputes from sharing oil revenues to resolving internal boundaries.