The draft resolution calls for a security council mandate for a multinational military force, under a unified command and with American commanders ultimately in charge.
The draft will also invite the Iraqi governing council to set out its own timetable for elections which will be administered by the US, and a return to sovereignty.
The Americans hope a UN mandate will pave the way for other states, such as Pakistan, India and Turkey, to contribute troops on the ground to assist with the deteriorating security situation.
"Certainly, the United States will continue to play a dominant role," the secretary of state, Colin Powell, said. "But a dominant role does not mean the only role."
With the Bush administration having sidestepped the UN in order to go to war, the move marks a defeat for the White House, where defence department hawks had dismissed the UN as irrelevant. But the move will nonetheless come under stern criticism from the French, Germans and security council members who have argued that if the international community is going to share the burdens of occupation, it must share the decision-making.
Diplomats expect France to exact a heavy price for agreeing to the resolution. A vote is not expected for several weeks.
"The authority in Iraq should be the UN, as opposed to the occupying powers," said Mexico's UN ambassador, Adolfo Aguilar Zinser, a security council member.
The UN secretary general, Kofi Annan, has made it clear that he does not want UN blue helmets to be deployed in Iraq.
The French also believe that control must be handed over to the Iraqis as soon as possible. "The transfer of responsibility to the Iraqis is something which is a priority," said Jean-Marc de La Sabliere, the French UN ambassador. "On the whole subject we have to move fast, because the situation is deteriorating.
The Americans have made it clear that such power-sharing is not up for negotiation. They point to operations in Bosnia, Kosovo and East Timor as precedents for UN-mandated military operations under a unified command, with a single country in charge.
The US plans to follow up the draft resolution with a diplomatic offensive, with telephone calls to foreign ministers to rally support.
The latest initiative comes primarily in a response to the widespread perception that Washington is losing control of the security situation in Iraq, prompted by the recent bombings by Iraqi insurgents of a senior Shia cleric, the UN's offices in Baghdad and the Jordanian embassy.
It is a view compounded by domestic concerns that America's military forces are being stretched too thin, the daily increase in US military casualties and the huge cost of the occupation in the runup to US elections next year. A congressional study released yesterday showed that the US army lacks the active-duty troops to sustain the occupation past next March without either receiving help from other states, calling on other services and reserves, or spending vastly more money.
At present the army operates a rotation system where a unit serves in Iraq for six months to a year before returning home for rest and training. The report shows that, given its commitments in Afghanistan, Kosovo, Bosnia and South Korea, the Pentagon does not have enough personnel to keep that up.
"The need to maintain levels of training and readiness, limit family separation and ... retain high quality personnel would most likely constrain the US occupation force to be smaller than its current size," it says.