US President Barack Obama has said Iraq took a promising step forward today, with the designation of a new prime minister.
He also urged the formation of an inclusive government to address the needs of all Iraqis.
Mr Obama was speaking to reporters from the Massachusetts island of Martha's Vineyard, where he is on holiday with his family.
Earlier, President Fuad Masum asked Iraq's deputy speaker of parliament, Haider al-Abadi to form a new government.
Mr Obama called Mr Mr Abadi's nomination to replace Iraqi Prime Minister Nuri al-Maliki "a promising step."
"I urge all Iraqi political leaders to work peacefully through the political process in the days ahead," Mr Obama added.
Mr Maliki has said the nomination of a new prime minister was a "dangerous violation" of the country's constitution.
The controversy over the nomination comes as the army and security forces battle Islamic State militants for control of vast areas of the north of the country.
Mr Maliki earlier indicated that he would not halt his efforts for a third term in power.
UN Secretary-General Ban Ki-moon has also welcomed what he described as "the forward movement toward government formation in Iraq".
He praised the Iraqi president's decision to ask Mr Abadi to form a new cabinet.
Meanwhile, European Union envoys are to meet tomorrow for an emergency meeting over the deepening crisis in Iraq, an EU diplomatic source said.
The source said envoys from the EU's member states would meet in Brussels in order "to coordinate as well as possible" a response to the latest advances by Islamist militants across Iraq.
Elsewhere, the Pentagon said the US has no plans to expand its air campaign in Iraq beyond protecting American personnel in the city of Irbil and besieged Yazidi refugees.
"There are no plans to expand the current air campaign beyond the current self defence activities," Lieutenant General William Mayville told reporters at the Pentagon.
Last week, US warplanes launched strikes to beat back extremist fighters from the so-called Islamic State (IS) who had threatened to massacre the Yazidi religious minority and attack Irbil.
Irbil, the capital of Iraq's autonomous Kurdish region, hosts a US consulate and other facilities, and President Obama said he had ordered air strikes to protect US ives.
Meanwhile, US planes joined Iraqi forces in attempting to bring aid to thousands of Yazidis trapped on an exposed mountain and under attack by the IS militants who had driven them from their homes.
Today, the Pentagon said US fighter jets had carried out four strikes on IS checkpoints and vehicles around Mount Sinjar in "defence of internally displaced Yazidi civilians in the area."