BAGHDAD — The U.S. formally transferred control of the Green Zone to Iraqi authorities today 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.

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.

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 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 today.

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