But even as he declared the recent U.S. troop surge a "success," Bush said Americans must now prepare for a long-term U.S. military commitment in Iraq that will continue for years after he leaves the White House in early 2009.
In a prime-time televised address to the nation, Bush said he plans to negotiate an "enduring" strategic pact with Iraqi leaders to provide military, economic and political assistance to the war-torn nation.
"Because of the measure of success we are seeing in Iraq, we can begin seeing troops come home," Bush said in remarks prepared for delivery from the Oval Office.
"At the same time, [Iraqis] understand that their success will require U.S. political, economic, and security engagement that extends beyond my presidency."
Conscious that a majority of Americans no longer approve of the war, Bush stressed that any long-term military arrangement with Iraq would require "many fewer American troops."
The White House plan would see the number of American forces in Iraq reduced from more than 168,000 to about 135,000 by the end of July 2008. The first troops to leave will be 2,200 Marines this fall followed by an army combat brigade in December.
In all, White House officials said the U.S. plans to withdraw five combat brigades plus support units by next summer.
Even with the reduction in forces, the U.S. military presence in Iraq will remain about as high as it was before Bush announced his "surge" of troops last January.
"The principle guiding my decisions on troop levels in Iraq is 'return on success,'" he said.
Bush's speech capped a tumultuous week on Capitol Hill for America's top military commander in Iraq, Gen. David Petraeus, who faced Republican and Democratic lawmakers skeptical of claims the U.S. was making progress in stabilizing Iraq.
Petraeus recommended Bush proceed with troop reductions on evidence that sectarian violence and civilian deaths had dropped in Iraq since June. He highlighted dramatic security improvements in al Anbar province -- once a haven for al-Qaeda fighters -- as a model for future progress in other parts of Iraq.
But even as Bush cited Anbar as a success story, the White House was reeling Thursday with news that a leading tribal sheik in the Sunni-dominated province had been killed. Sheik Abdul Sattar Abu Risha, who forged an alliance with the U.S. against al-Qaida, was killed by a roadside bomb in Ramadi. His death came less than two weeks after he met with Bush during the president's unannounced Labour Day visit to Iraq.
The incident underscored the fragile nature of American gains in Iraq. But the White House said it is confident Sattar's death will not derail efforts to drive al-Qaida out of the region.
"What we have heard today from his allies and colleagues there is that this only reinforces their desire to complete their work and to honour his sacrifice," said a senior U.S. official.
The White House troop surge was viewed last January as a major gamble for Bush, whose Republicans have fought off several attempts by Democrats in Congress to mandate a much quicker reduction of U.S. troops.
But it appears Petraeus's testimony about improving conditions in Iraq is paying some modest political dividends to the White House. An NBC News poll released Thursday found 30% of Americans approved of his handling of the war, up from an all-time low of 22%.
The White House also believes it has bought some time with senior Republican lawmakers who have increasingly expressed doubt that the troop surge had resulted in any lasting security gains.
The resolve of Republicans is likely to be tested in the next week as Democrats prepare more legislation aimed at forcing a speedier withdrawal.
In his speech, Bush said he hoped to avert an ugly political showdown with Congress.
"The way forward I have described tonight makes it possible, for the first time in years, for people who have been on opposite sides of this difficult debate to come together," Bush said.
White House officials likened plans for a long-term military pact with Iraq to similar arrangements in countries like South Korea, where about 50,000 American troops are stationed as a deterrent against aggression from North Korea.
In candid remarks to remarks before Bush's speech, a senior administration official said Bush is eager to ensure that Iraq is not a mess when he leaves office.
Bush "wants to get our position in Iraq to a point where it's in a good place for the next president to come in," the official said. "And this is something that whomever is elected in 2008 as the next president is going to gauge -- what our presence in Iraq, and how it affects our national security, means."
Wow, I honestly did not see that one coming.