Iraqi Prime Minister Haider al-Abadi and prominent Shia cleric and politician Muqtada al-Sadr sealed an alliance to form a new government late Saturday.
Announcement came in two leaders' joint news conference in the southern city of Najaf late Saturday.
Al-Sadr said that he conveyed some issues about new government to Al-Abadi. Those are "fighting against corruption, strengthening the army, not intervening the government and establishing a technocratic government with an alliance above sects."
Al-Sadr had hoped to form a coalition government with Vice-President Iyad Allawi's Al-Wataniya bloc and Ammar al-Hakim's National Wisdom Movement.
But the three blocs together do not have the 50-percent-plus-one majority (165 out of 329 seats in parliament) needed to form a governing coalition.
Last week, several Iraqi political parties reacted negatively after al-Sadr hinted at a possible alliance with the Iran-backed Fatah Coalition.
Some left-wing parties went so far as to say that they would throw in their lot with the opposition if such an alliance came to fruition.
However, Iraq's two main Kurdish parties, the Kurdistan Democratic Party and Patriotic Union of Kurdistan, reportedly view the would-be alliance with Fatah in a positive light.
Although al-Sadr is a frequent critic of Iranian influence in Iraq, he nevertheless maintains close ties with Tehran.
For years, al-Sadr studied under Iranian clerics in the Iranian city of Qom, which has historically been a center of Shia religious scholarship.
Al-Sadr's Sairoon coalition dominated the 12 May poll, winning 54 parliamentary seats, according to official results.
Sairoon was followed by a Hashd al-Shaabi-linked coalition (47 seats) and Prime Minister Haidar al-Abadi's Victory Bloc (42 seats).
Al-Hakim's National Wisdom Movement, meanwhile, clinched 19 seats in the legislative assembly.