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The announcement came after talks between the US president and Iraq’s prime minister Mustafa al-Kadhimi in the White House.
"Our role in Iraq will be...to be available, to continue to train, to assist, to help and to deal with ISIS as it arises, but we’re not going to be, by the end of the year, in a combat mission," Mr Biden told reporters.
There are currently 2,500 US troops in Iraq focusing on countering the remnants of Islamic State. America’s role in Iraq will shift entirely to training and advising the Iraqi military to defend itself.
The shift is not expected to have a major operational impact since the United States has already moved toward focusing on training Iraqi forces.
The deal to end the combat mission in Iraq follows Mr Biden’s move to carry out an unconditional withdrawal from Afghanistan and wrap up the US military mission there by the end of August.
It means the Democratic president is moving to formally complete US combat missions in the two wars that then-President George W Bush began under his watch nearly two decades ago.
A US-led coalition invaded Iraq in March 2003 based on charges that then-Iraqi leader Saddam Hussein's government possessed weapons of mass destruction. Saddam was ousted from power, but such weapons were never found.
In recent years, the US mission was focused on helping defeat Islamic State militants in Iraq and Syria.
“Nobody is going to declare mission accomplished. The goal is the enduring defeat of ISIS,” a senior administration official told reporters ahead of Mr Kadhimi's visit.
The reference was reminiscent of the large "Mission Accomplished" banner on the USS Abraham Lincoln aircraft carrier above where Mr Bush gave a speech declaring major combat operations over in Iraq on May 1, 2003.
The senior administration official would not say how many US troops would remain on the ground in Iraq for advising and training.
The US plans to provide Iraq with 500,000 doses of the Pfizer/BioNTech Covid-19 vaccine under the global COVAX vaccine-sharing programme. Mr Biden said the doses should arrive in a couple of weeks.