Nearly a year after the U.S. gambled by pouring troops into Iraq's capital, there is finally cause for hope that the worst of the Iraq war may have passed, even if the endgame takes longer than Americans and Iraqis want.
But the political rivalries between Sunnis and Shiites that fueled the conflict remain unresolved. And time may be running out for America to midwife a solution.
By July, the United States expects to withdraw all five combat brigades that were rushed to Iraq this year by President Bush to quell a tide of Sunni-Shiite slaughter that threatened to tear apart the country.
Also by mid-2008, U.S. and Iraqi officials hope to finish negotiations on a new deal that will shift more power to the Iraqis and probably reduce Washington's ability to influence decisions by Iraq's sectarian-minded leaders.
Nevertheless, the security turnaround over the past three months has been startling.
In November 2006, at least 2,250 Iraqis civilians, soldiers and police - were killed in political violence. Last month, the death toll was 718.
American deaths are down too, plunging from 126 in May to fewer than 40 for both October and November even though 2007 is the deadliest year of the war for U.S. forces.
Thousands of Iraqis who fled the country are now returning. Areas of Baghdad that were ghost towns only a few months ago are reviving. Shoppers stroll the streets with their children - even after dark.
"I think next year will be better because the situation is improving every day," said Firas Adel, a Shiite clothing merchant. "More people are returning to their homes and businesses. There is sense of safety and stability, and this will boost the economy."
Defense Secretary Robert Gates, in an early December stop in Iraq, was even able to project a sense of optimism that would have seemed ludicrous at the beginning of the year. "I believe that a secure, stable Iraq is within reach," Gates said. But he added: "We need to be patient."
The relative calm in Baghdad, Anbar and other battlefronts is fragile; fighting still rages in key areas not far from the capital. Bombs explode nearly every day in Baghdad, but draw little attention unless they cause multiple casualties.
Furthermore, Shiite and Sunni extremists groups, including al Qaeda in Iraq, have been battered but not destroyed. Al Qaeda fighters forced out of Baghdad are trying to regroup in northern Iraq and in the Euphrates Valley near Haditha to the west.
Other armed groups are believed laying low, waiting for the U.S. drawdown to return to the streets.
"There are good stories to tell here in terms of returning Iraqis. There are economic developments that are occurring that need to be reported. But I would do it at a measured pace," U.S. military spokesman Rear Adm. Gregory Smith counseled journalists recently.
Much of the success is due to President Bush's decision to send nearly 30,000 American reinforcements to Iraq and to changes in tactics by top U.S. commander Gen. David Petraeus.
With the added firepower, U.S. forces drove Sunni militants, including al Qaeda in Iraq, away from their strongholds in Sunni-dominated areas in and around Baghdad. U.S. and Iraqi forces are pressuring extremists in northern and western Iraq to prevent them from regrouping.
The buildup encouraged Sunni tribal leaders to accelerate their revolt against al Qaeda, which began even before the troop surge. Now thousands of Sunnis are signing up to join U.S.-backed defense groups to make sure the extremists cannot return.