Iraqi security forces jubilantly paraded in tanks and armoured vehicles on Tuesday as they took control of towns and cities, but the celebrations were marred by a car bomb that killed 27 people.

Iraq marked the June 30 pullback of US troops with a national holiday six years after the invasion that toppled Saddam Hussein but which sparked an insurgency and sectarian bloodshed that left tens of thousands dead.

American troops were set to quit their posts in built-up areas by midnight (2100 GMT), ahead of a complete pullout by the end of 2011.

Before a car bomb in the northern oil hub Kirkuk overshadowed the festivities, Prime Minister Nuri al-Maliki took issue with critics of Iraq's army and police, insisting they were up to the task of defending the country in the wake of the US withdrawal.

"It is an offence to the Iraqis. The people who said that the foreign troops would never withdraw and would keep permanent bases in our country were giving a green light to the terrorists to kill civilians," he said.

Twenty-seven people, including women and children, were killed and 80 wounded in the early evening attack in Kirkuk, according to the city's director of health.

Maliki, who laid a wreath at Iraq's tomb of the unknown soldier inside the heavily fortified Green Zone, wanted the pullback date to coincide with the outbreak in 1920 of a revolt against British occupation after World War I.

President Jalal Talabani thanked US forces for their role in overthrowing Saddam's regime in 2003, and in the years of bloodshed that followed.

"They bore the burden and dangers against the most cruel regime and against the mutual enemy -- the terror," Talabani said on state television.

The handover coincided with a US army announcement that four of its soldiers died from combat-related injuries on Monday, taking to 4,321 the number of American troops killed since the invasion.

General Ray Odierno, the top US commander in Iraq, told reporters he believed Iraq was now a better country.

"I believe the Iraqi people are much better off not having a dictator such as Saddam Hussein," he said. "They are now going to be able to see that they can move ahead and the people of Iraq will have a say in their government."

Odierno, however, refused to give a number for how many US troops would be left in urban centres.

"The reason I won't do it is because it will be different every single day," he told US journalists in a video-briefing from Iraq, adding that the remaining US troops would be acting as trainers and advisers to Iraqi security forces.

In Beirut, visiting US Central Command chief General David Petraeus said the withdrawal was "moving smoothly, although there have been some sensational attacks."

Tuesday's pullback is part of a security agreement signed in November setting the terms for a continued US troop presence in Iraq. There are now some 133,000 US personnel in Iraq.

Across Baghdad, tanks and armoured vehicles manned by soldiers and police and decorated with artificial flowers, flags and banners passed through the city, as nationalistic songs and popular music played.

"We are happy to receive the security responsibilities and we are able to totally protect our citizens," said policeman Ibrahim al-Mashhadani.

The security shake-up was celebrated by huge crowds in Baghdad's largest park on Monday. Revellers had to undergo three security checks to enter. Even policemen joined in the fun, dancing with the partygoers.

Maliki warned earlier this month that insurgent groups and militias were likely to step up attacks in the run-up to June 30 in a bid to undermine confidence in Iraq's own security forces.

There have been several huge bombings since, the deadliest near Kirkuk on June 20 when 72 people were killed.

The Status of Forces Agreement, which set the pullback deadline, says US commanders must now seek Iraqi permission to conduct operations, but their troops retain a unilateral right to "legitimate self-defence."

Three out of four Americans support the withdrawal from urban centres, although they believe the pullout may lead to increased violence, according to a CNN/Opinion Research Corporation poll released on Tuesday.