Iraq will hold its general election on January 21, the war-torn country's election chief said on Monday, a vote crucial to consolidating its fledgling democracy and ensuring a complete US military exit.

MPs on Sunday finally passed the electoral law that will govern the contest, the second national polls since the American-led invasion that ousted dictator Saddam Hussein six years ago, after weeks of wrangling.

The environment in which the general election takes place is likely to be radically different from that of the previous national ballot in December 2005.

Sectarian strife between the country's Shiite and Sunni communities was then rising and at its peak in 2006 saw an average of 63 people being killed each day, compared with less than 10 deaths per day so far this year.

Falaj al-Haidari, head of Iraq's Independent High Electoral Commission (IHEC) said the vote would be held on January 21.

"We sent a letter on Monday to the presidency and we have received confirmation in a telephone call that they accept the date," he said.

The approval of the electoral law yesterday was praised by US President Barack Obama and UN chief Ban Ki-moon, who said the vote was key to maintaining stability and helping Iraqis move towards a lasting peace.