"Congress voted yesterday to provide our troops with the funding and flexibility they need to protect our country, and I was pleased to sign the bill today," Bush said in a statement Friday.

"Rather than mandate arbitrary timetables for troop withdrawals or micromanage our military commanders, this legislation enables our servicemen and women to follow the judgment of commanders on the ground," he added.

The president's Democratic foes in Congress had ceded to his demands to strip timelines for troop withdrawals out of the war funding bill passed Thursday. But Democrats have vowed fresh efforts to end the conflict.

Bush reiterated that the measure sets the stage for pressing the fragile government in Baghdad to make progress on national reconciliation.

"Iraqis need to demonstrate measurable progress on a series of benchmarks for improved security, political reconciliation and governance," the statement said, referring to provisions in the bill.

Bush had earlier told reporters: "I look forward to continuing to work with the prime minister and his government in meeting those expectations," referring to Iraq's Nuri al-Maliki.

Bush's signature on the bill cements a short-term truce with anti-war Democrats in a fierce struggle for control of the unpopular war.

But the president's foes warned they were girding for a new assault on his authority in coming months, and claimed a breakthrough in reining him in over the unpopular and bloody conflict.

"I think that the president's policy is going to begin to unravel now," said Nancy Pelosi, Democratic speaker of the House of Representatives. She admitted however that the budget bill, which she voted against, fell short of Democratic aspirations. After Congress returns from a week-long break, Pelosi said, Democrats would seek to renew the battle to force Bush to change course in Iraq, targeting several defence spending bills due for debate.

She also pledged to schedule a vote on withdrawing Bush's congressional authorization to wage war in Iraq, granted in 2002. Senator Hillary Clinton has introduced a similar bill in the US Senate.

"September is the moment of truth for this war," Pelosi said, referring to a date when the top US commander in Iraq, General David Petraeus, is expected to report on progress of Bush's surge of nearly 30,000 extra troops into Iraq.