Haider al-Abadi has received the endorsement of the Shia bloc
Iraq's president has asked the deputy speaker of parliament, Haider al-Abadi, to form a new government.
Mr Abadi has been nominated prime minister by Shia parties, instead of the incumbent Nouri Maliki.
But Mr Maliki has made it clear he wants to stand for a third term, and pro-Maliki security forces took key sites in Baghdad overnight.
Meanwhile the jihadist insurgency in the north of Iraq continues to cause international concern.
Although he has fought long and hard to hold on to his job as prime minister, it is hard to see how Nouri al-Maliki can continue to cling on.
For the past four years, Mr Maliki has held the defence, interior and intelligence portfolios, building up a powerful network of personal patronage among the security forces, estimated at more than a million strong, as well as setting up elite units directly responsive to him alone.
The question now is whether he will try to use the army and police forces to keep himself in power through an in situ coup, despite his lack of political support virtually across the board.
His State of Law coalition came out ahead in the April elections, but far short of an outright majority.
Having broadly alienated the Kurds and Sunnis, he now finds that even the Shia majority has concluded that he is not the man to weld the country together against the radical Islamist threat.
Security forces have been seen on Baghdad streets
President Fuad Masum said in a TV address that he hoped Mr Abadi would succeed in forming a government that would "protect the Iraqi people".
Analysts say the announcement is a public snub for Mr Maliki.
Mr Maliki's State of Law coalition won the most seats in April's elections, but parliament has never agreed to give him a third term.
His popularity has suffered from the growing Islamist insurgency in the north - and even before that his support from Sunnis and Kurds was dwindling.
Now he has lost support from his own Shias - with the Shia National Alliance reported to have supported Mr Abadi with 130 votes, compared to just 40 votes for Mr Maliki.
Earlier on Monday, US Secretary of State John Kerry called on Mr Maliki not to increase tensions, and warned against the use of force by political factions.
Town captured
Reports are emerging in northern Iraq that Islamic State (IS) militants have captured the town of Jalawla, north-east of Baghdad, after weeks of clashes with Kurdish fighters.
On Sunday, Kurdish forces said they had regained the towns of Gwer and Makhmur from the militants, helped by recent US air strikes in Nineveh province.
The US has already launched four rounds of air strikes targeting the militants near Irbil, the capital of Iraqi Kurdistan.
In western Iraq, minority religious groups, such as the Yazidis, have been forced from their homes, prompting international aid drops.
Witnesses told the BBC that thousands of refugees near Sinjar had escaped to safer areas.
The US air strikes have been the first direct American involvement in a military operation in Iraq since the US withdrawal from the country in late 2011.
US President Barack Obama authorised the strikes last week after members of the Yazidi sect were forced to flee Sinjar into the surrounding mountains.
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