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BAGHDAD – The United States inaugurated its largest embassy ever on Monday, a fortress-like compound in the heart of the Green Zone — and the most visible sign of what U.S. officials call a new chapter in relations between America and a more sovereign Iraq.

AP – U.S. Deputy Secretary of State John Negroponte, right, and Iraqi President Jalal Talabani look on during

U.S. Marines raised the American flag over the adobe-colored buildings, which sit on a 104-acre site and has space for 1,000 employees — more than 10 times the size of any other American Embassy in the world.

"Iraq is in a new era and so is the Iraqi-U.S. relationship," Ambassador Ryan Crocker proclaimed.

In perhaps an unintended sign of the new relationship, Prime Minister Nouri al-Maliki did not attend Monday's ceremony because he was traveling in Iran, a country the U.S. has accused of aiding and arming Iraqi militants.

Explaining the opening of such a large embassy three years before the U.S. must finish withdrawing its 146,000 troops from Iraq, Crocker told The Associated Press that it is vital for the U.S. to remain involved in nonmilitary ways.

"I think we have seen a tremendous amount of progress," Crocker said before the ceremony, "but the development of this new Iraq is going to be a very long time in the making, and we need to be engaged here."

Crocker said Baghdad was looking to the West for the first time since the Army's 1958 revolution that toppled Iraq's monarchy and set the stage for the ascendance of the Baath party, which dominated Iraq until the 2003 invasion.

"Iraq has defined itself in general hostility to the West and the United States. You now have a fundamentally different state and society taking shape that values those relations, that values those contacts, that wants its children educated in American and other Western universities. And we need to be there as a partner to ensure that those relationships are solidly built and well maintained," he said.

"We will be engaged in different ways as security continues to improve and as Iraqi security forces are more and more in the lead. But that engagement over the long term is key," he added.

The veteran diplomat has served many years in the Middle East, where a lack of U.S. resolve in Lebanon 20 years ago opened that country to meddling from Iran and Syria.

The inauguration of the $700 million embassy came just days after a security agreement between Iraq and the United States took effect, replacing a U.N. mandate that gave legal authority to the U.S. and other foreign troops to operate in Iraq.

Under the new security agreement, U.S. troops will no longer conduct unilateral operations and will act only in concert with Iraqi forces. They must also leave major Iraqi cities by June and the entire country by the end of 2011. Another accord mapped out the bilateral relations.

Crocker said that since 2003 invasion, "perhaps no single week has been more important than this past week. On Dec. 31 we left the Republican Palace."

U.S. diplomats and military officials moved into the embassy on Dec. 31 after vacating Saddam Hussein's Republican Palace, which they occupied when they captured Baghdad in April 2003. The palace will now seat the Iraqi government and al-Maliki's office.

For nearly six years, the grandiose and gaudy palace, with its gold-plated bathroom fixtures, wall paintings of Scud missiles and enormous chandeliers, served as both headquarters for occupying forces and the hub for the Green Zone — the walled-off swath of central Baghdad that was formally turned over to the Iraqi government on New Year's Day.

The new embassy's exact dimensions are classified, but it is said to be six times larger than the U.N. complex in New York and more than 10 times the size of the new U.S. Embassy in Beijing, which at 10 acres is America's second-largest mission.

Reinforced concrete surrounds the new compound, which provides housing for hundreds of staff who had been living in makeshift quarters with aluminum walls that provided little protection from mortar rounds that were fired daily into the Green Zone a year ago. "It is from the embassy that you see before you that we will continue the tradition of friendship, cooperation and support begun by the many dedicated Americans who have worked in Iraq since 2003," U.S. Deputy Secretary of State John Negroponte told guests at the ceremony in the complex's courtyard.

Iraqi President Jalal Talabani, a longtime Washington ally, praised President George W. Bush's decision to invade Iraq in 2003 and topple the regime of Saddam Hussein, who was executed two years ago.

"The building of this site would not be possible without the courageous decision by President Bush to liberate Iraq," said Talabani, a Kurd. "This building is not only a compound for the embassy but a symbol of the deep friendship between the two peoples of Iraq and America."

But as U.S. and Iraqi officials lauded progress in the country, Baghdad was rocked by a second day of violence that saw four car bombs explode in various parts of the city, killing four people and wounding 19.

Though violence has plummeted around Iraq in the past year, with attacks dropping from an average 180 a day to just 10, horrific bombings still plague the capital. Many recent attacks have targeted pilgrims during ceremonies commemorating the death of a much revered Shiite saint.

On Sunday, a suicide bomber killed at least 38 people at a Shiite shrine just four miles north of the new embassy.

Iraqi officials said the bomber was a man disguised as a woman. Initial reports said the attacker was a woman concealing a bomb under her black cloak. At least 17 of the dead were Iranian pilgrims.

In response to that attack, Iraqi authorities banned female pilgrims from entering the district for ceremonies on Tuesday and Wednesday.

BAGHDAD – The U.S. formally transferred control of the Green Zone to Iraqi authorities Thursday in a pair of ceremonies that also handed back Saddam Hussein's former palace. Iraq's prime minister said he will propose making Jan. 1 a holiday marking the restoration of sovereignty.

AP – US and Iraqi soldiers raise Iraq's flag during a ceremony in which Iraqi forces took control of the Joint

Under the new security agreement between Washington and Baghdad to replace a U.N. mandate for foreign troops in Iraq, the Iraqi government also now has control of American troops' actions and of the country's airspace.

The moves came amid a dramatic fall in violence over the past year. However, insurgents still stage daily attacks and could try to expand the fight now that U.S. troops cannot take unilateral action.

Two Iraqi soldiers and three policemen were killed in attacks Thursday. In the northern city of Kirkuk, Iraqi and U.S. troops killed three suspected al-Qaida gunmen during a raid, police said.

Many of the changes inaugurated on New Year's Day won't bring immediately visible results. The Green Zone, the country's government and military command center, remains ringed by concrete blast walls and off limits to most Iraqis. U.S. troops still man its checkpoints, although now as trainers rather than leaders.

But the Americans have moved out of the Republican Palace, the sprawling former headquarters of Saddam's regime that they took over shortly after the 2003 invasion. Prime Minister Nouri al-Maliki formerly took control of the building Thursday and exulted over the security pact under which U.S. troops are to leave the country by 2012.

"A year ago, the mere thought of forces withdrawing from Iraq was considered a dream," al-Maliki told reporters afterward. "The dream that no one had the right to think about became true."

He called for making Jan. 1 a national holiday called "Sovereignty Day." Iraq already officially observes New Year's Day as a holiday.

Also on Thursday, British troops turned over to Iraqi officials the airport in Basra, the country's second-largest city. Britain says it will withdraw its approximately 4,000 soldiers in Iraq by May 31.

"Iraq is taking another step toward the future, signaling to its citizens and the international community that it is indeed a new day for sovereign Iraq," U.S. Army Col. Steven Ferrari said at a separate ceremony handing over control of the Green Zone.

The Green Zone was the most potent symbol of the U.S. invasion and occupation.

The 4-square-mile area, which nestles into the start of an oxbow bend of the Tigris River, formally is called the International Zone. Sarcastically, it's called "The Bubble" because the foreigners who live and work there often have little contact with the shabby and violent city on the other side of the 13-foot-high, reinforced concrete blast walls around the perimeter.

But the sense of security is only relative. The zone was a favorite target for rockets and mortars fired by insurgents. In 2007, the attacks were so heavy that the U.S. Embassy ordered its workers to wear flak jackets and helmets anywhere outside.

Asked whether insurgents could resume attacks now that the area is under Iraqi control, Ferrari said, "Common sense says they'll probably test the Green Zone."

The walls and the seemingly endless series of checkpoints inside have been worrisomely porous. A suicide bomber attacked the parliament's dining hall in 2007, killing one person. Suicide vests wired with explosives have been found on the grounds.

Although Baghdad is calmer now, the Green Zone is full of unsettling reminders of war. Duck-and-cover bunkers dot sidewalks under lush date palms. Walls bear signs warning drivers not to stop for any reason and frequent speed bumps force vehicles to a near crawl.

Even before U.S. troops took control of the area in 2003 and put up the walls, the neighborhood had an air of intimidation. Saddam and his sons had lavish residences there and motorists who drove through understood they shouldn't stop.

Now, Iraqi officials have their eyes on making the area accessible, inspiring and educational, even though it's not yet clear when they will feel confident enough to take down the walls.

"It depends. There are many steps to take," Iraqi Security Minister Sherwan al-Waili said when asked about prospects for opening the zone.

In July, the National Investment Commission approved plans to build a $100 million luxury hotel in the zone.

And in the next couple of months, the Iraqi High Tribunal plans to open a museum in the zone detailing the brutality of Saddam's regime. It will include a replica of the hole-in-the-ground hideout where Saddam was captured in 2004, two years before he was executed, tribunal head Arif Abdul-Razzak Al-Shaheen told the newspaper Asharq al-Awsat last month.

Violence around Iraq plunged in 2008, with attacks declining to an average of 10 a day from 180 a year ago. The murder rate in November was less than 1 per 100,000 people — far lower than many cities in the world.

U.S. military deaths in Iraq plunged by two-thirds in 2008 from the previous year, a reflection of the improving security following the American counterinsurgency campaign and al-Qaida's slow retreat from the battlefield.