The agreement, which both sides hope to finish in midsummer, is likely to be among the issues discussed this weekend when Prime Minister Nouri al-Maliki is due to visit Iran - his second trip there in a year.
Ahead of the visit, his party sought to calm worries by insisting that the deal would not allow foreign troops to use Iraq as a ground to invade another country - a clear reference to Iranian fears of a U.S. attack.
For their part, congressional Democrats have urged the Bush administration not to bypass Congress, which they believe should approve any deal. They fear a long-term security deal with Iraq - if it committed the U.S. to protecting Iraq - could make it difficult for the next president to withdraw U.S. forces.
But the toughest words have come from Iraqi politicians, especially those loyal to Muqtada al-Sadr, the anti-American cleric whose militiamen fought U.S. and Iraqi troops in Baghdad until a May truce ended seven weeks of fighting.
A lawmaker from al-Maliki's party told reporters Tuesday that the Iraqis and the Americans are far apart on the security agreement. He said negotiations "are at a standstill, and the Iraqi side is studying its options."
"The Americans have some demands that the Iraqi government regards as infringing on its sovereignty," lawmaker Haidar al-Abadi said. "This is the main dispute, and if the dispute is not settled, I frankly tell you there will not be an agreement."
U.S. Embassy spokeswoman Mirembe Nantongo described talks over the pact as "active" and said Tuesday that "texts are very much in flux."
The deal would establish a long-term security relationship between Iraq and the United States, and a parallel agreement providing a legal basis to keep U.S. troops in Iraq after the U.N. mandate expires at the end of the year.
Supporters believe the deal would help assure Iraq's Arab neighbors, notably Saudi Arabia and the Persian Gulf states, that Iraq's Shiite-led government would not become a satellite of Shiite-dominated Iran as American military role here fades.
But public critics in Iraq worry the deal will lock in American military, economic and political domination of the country.
Al-Abadi said major stumbling blocks include the future status of U.S. military bases and American use of airspace over Iraq.
Most Iraqis view the U.S. insistence that American troops continue to enjoy immunity under Iraqi law as an infringement on national sovereignty. U.S. officials maintain they respect Iraqi sovereignty and are not seeking permanent bases.
Although opposition has spread beyond the Sadrists, the role of the militant cleric is a matter of special concern for the Americans.
Al-Sadr is believed to be living in the Iranian city of Qom, and U.S. officials believe Iran has been arming and training Shiite militiamen. Iran denies the allegation.
That has sharpened the Iran vs. U.S. aspect of the issue.
U.S. officials increasingly see the criticism as driven by Iran through al-Sadr, who has called for weekly protests against the agreement. Al-Sadr has long opposed the U.S. military presence in Iraq.
Concerned that al-Sadr was scoring political points, mainstream Shiite and Sunni politicians began to speak out against the proposed deal too, distancing themselves from the deliberations for fear of being seen as selling out to the Americans.
All that puts pressure on al-Maliki, himself a Shiite, as he tries to maintain ties to Iran while at the same time ensuring his support from the United States.
Al-Maliki needs to persuade the Iranians to rein in Shiite extremists but also assure them that security ties to the United States would not threaten the Islamic Republic.
Ahead of the visit, al-Maliki's party issued a statement this week declaring that "Iraqi territory should not be used for military operations against any neighboring countries by foreign forces."
Last month, a fourth round of Iraq security talks between U.S. and Iranian diplomats was postponed indefinitely and neither side seems eager to reschedule them anytime soon.
U.S. suspicions of an Iranian role were reinforced by recent comments by Sheik Hassan Nasrallah, leader of Hezbollah, the Iranian-backed Shiite movement in Lebanon.
During a speech last week, Nasrallah said Hezbollah's opposition to the U.S. and Israel serve as a model for resistance in the Arab world, including Iraq where "there exists an evident American occupation and American control of land and resources."
Nasrallah said U.S. efforts to promote democracy in Iraq were simply to prepare for the day when the U.S. "asks this legal (Iraqi) government ... to sign an agreement granting the Americans sovereign control over Iraq."
Without specifying the security pact, Nasrallah said the U.S. goal was to place "security, political decisions, oil and Iraqi resources in the hands of the Americans."
Nasrallah's comments came in the wake of Hezbollah's takeover of large areas of west Beirut last month, which politically strengthened the Iranian-backed movement at the expense of the Western-supported government.
That stoked fears in Arab capitals about Iranian influence in Iraq. So far, Arab governments remain leery of a Shiite-ruled Iraq and have not boosted their support of al-Maliki's government.