The Bush administration is said to have authorised the creation of an Iraqi intelligence service to spy on enemies of the US-backed authorities in Iraq.
Resistance to the US-led coalition is still strong
Top Iraqi officials are now at CIA headquarters in Langley, Virginia, to work out details, the Washington Post reports, quoting unnamed US sources.
They hope to recruit agents from among former officials of the Saddam regime.
Some sections of the Pentagon and part of the new Iraqi leadership itself have rejected the idea as fraught with risk.
Iraqi Interior Minister Nouri Badran and Ayad Alawi, leader of the former Jordanian-based Iraqi exiles' group Iraqi National Accord (INA), are both spending this week at Langley, according to the Post.
The two men worked closely with the CIA over the past decade in unsuccessful efforts to oust Saddam Hussein, the US paper says.
They now hope to recruit agents from among former regime officials for the new service which will be largely trained, equipped and funded by the CIA with help from Jordan.
According to the Post's sources, funds for the new service were approved in a classified part of the US budget and it should be up and running by mid-February.
Critics of the initiative include both Pentagon officials and Ahmed Chalabi, head of the best-known anti-Saddam group, the Iraqi National Congress (INC).
They believe that former regime officials cannot be trusted and their use could undermine the influence of the INC, the Washington Post's sources say.
Nouri Badran is also a member of Mr Alawi's INA, an organisation drawn mainly from military and security defectors during the Saddam years.