The cross-sectarian Iraqiya bloc headed by Allawi took 91 seats with the State of Law coalition led by Shi'ite Prime Minister Nuri al-Maliki close behind at 89 seats, a result that highlighted Iraq's sectarian gulf following a vote Iraqis hoped would stabilize their country after years of war.

Allawi, a secular Shi'ite who served as prime minister in 2004-5 and was once highly critical of Shi'ite neighbor Iran for meddling in Iraq, said in brief comments on television that he would extend "hands and heart" to all groups.

Nearly three weeks after the March 7 ballot, the preliminary results showed Maliki taking ethnically and religiously diverse Baghdad and predominantly Shi'ite southern provinces, while Allawi dominated largely Sunni northern and western regions.

Celebratory gunfire rang out in the streets of Baghdad after the results were announced.

The Iraqi National Alliance (INA), a Shi'ite bloc with close ties to Iran, was in third place with 70 seats, and the Kurdish alliance, a union of two powerful parties in Iraq's semi-autonomous Kurdish north, finished with 43 seats.

The INA, an alliance which includes anti-American cleric Moqtada al-Sadr currently studying in Iran, is negotiating a merger with Maliki's State of Law. Maliki said he was on the way to forming the biggest bloc in parliament.

But any attempt to sideline Allawi in what could be weeks or months of perilous negotiations to form a new government could lead to resentment among Sunnis shunted to the political wilderness when Iraq's majority Shi'ites rose to power following the 2003 U.S-led invasion that ousted Saddam Hussein.

Sectarian violence exploded after the last parliamentary vote in 2005 as politicians took more than five months to agree a government.