The newspaper said Iraqi strongman Saddam Hussein hopes this strategy may even persuade the U.S. to call off a military attack.
The Iraqis have begun building defensive positions around Baghdad and dispersing their armed forces to locations that will make them less vulnerable in the event of an attack, the Times said.
In a related development, White House lawyers have told President Bush he would not need congressional approval to attack Iraq, although advisers say political considerations could prompt the president to seek a nod from lawmakers anyway.
The Times said Baghdad is defended by four Republican Guard divisions, Iraq's best and most reliable ground force. Nevertheless, the Iraqi army and air force are extremely weak, and are not expected to provide much opposition for the U.S. in a conventional war.
It is this weakness, the newspaper said, that has prompted Saddam to adopt an urban warfare strategy that could produce heavy U.S. casualties.