The Interior Ministry, meanwhile, raised the death toll in Tuesday's suicide truck bombing of a Shiite market in Tal Afar to 152, which would make it the deadliest single strike since the war started four years ago.
A spokesman for the Shiite-dominated ministry, Brig. Gen. Abdul-Karim Khalaf, said the toll nearly doubled after more bodies were pulled from the rubble in the northwestern city.
The U.S. military and the mayor of Tal Afar kept the death toll at 83. But they acknowledged the figure could rise.
The contentious decision on Kirkuk was confirmed Saturday by Iraq's Sunni justice minister as he told The Associated Press he was resigning. Almost immediately, opposition politicians said they feared it would harden the violent divisions among Iraq's fractious ethnic and religious groups and possibly lead to an Iraq divided among Kurds, Sunni Arabs and Shiites.
The plan was virtually certain to anger neighboring Turkey, which fears a northward migration of Iraqi Kurds - and an exodus of Sunni Arabs - will inflame its own restive Kurdish minority.
Around Iraq Saturday, at least 38 people were killed or found dead in series of bombings and attacks, including nine construction workers who died when gunmen opened fire on their bus south of Kirkuk. The violence capped a week in which more than 500 Iraqis were killed in sectarian violence.
The ancient city of Kirkuk has a large minority of ethnic Turks as well as Christians, Shiite and Sunni Arabs, Armenians and Assyrians. The city is just south of the Kurdish autonomous zone stretching across three provinces of northeastern Iraq.
Iraq's constitution sets an end-of-the-year deadline for a referendum on Kirkuk's status. Since Saddam's fall four years ago, thousands of Kurds who once lived in the city have resettled there. It is now believed Kurds are a majority of the population and that a referendum on attaching Kirkuk to the Kurdish autonomous zone would pass easily.
Justice Minister Hashim al-Shebli said the Cabinet agreed on Thursday to a study group's recommendation that Arabs who had moved to Kirkuk from other parts of Iraq after July 1968 should be returned to their original towns and paid compensation.
Al-Shebli, who had overseen the committee on Kirkuk's status, said relocation would be voluntary. Those who choose to leave will be paid about $15,000 and given land in their former hometowns.
"There will be no coercion and the decision will not be implemented by force," al-Shebli told the AP.
Tens of thousands of Kurds and non-Arabs fled Kirkuk in the 1980s and 1990s when Saddam's government implemented its "Arabization" policy. Kurds and non-Arabs were replaced with pro-government Arabs from the mainly Shiite impoverished south.
After the U.S.-led invasion of Iraq in March 2003, Kurds and other non-Arabs streamed back, only to find their homes were either sold or given to Arabs. Some of the returning Kurds found nowhere to live except in parks and abandoned government buildings. Others drove Arabs from the city, despite pleas from Sunni and Shiite leaders for them to stay.
Adil Abdul-Hussein Alami, a 62-year-old Shiite who moved to Kirkuk 23 years ago in return for $1,000 and a free piece of land, said he would find it hard to leave.
"Kirkuk is an Iraqi city and I'm Iraqi," said the father of nine. "We came here as one family and now we are four. Our blood is mixed with Kurds and Turkmen."
But Ahmed Salih Zowbaa, a 52-year-old Shiite father of six who moved to the city from Kufa in 1987, agreed with the government's decision. "We gave our votes to this government and constitution and as long as the government will compensate us, then there is no injustice at all," he said. There were fears that a referendum that was likely to put Kirkuk, 180 miles north of Baghdad, under Kurdish control could open a new front in the violence that has ravaged Iraq since shortly after the U.S.-led invasion. On March 19, several bombs struck targets in Kirkuk and killed at least 26 people. Al-Shebli, a Sunni Arab, also confirmed he had offered his resignation on the same day that the Cabinet approved the plan. He cited differences with the government and his own political group, the secular Iraqi List, which joined Sunni Arab lawmakers Saturday in opposing the Kirkuk decision. He said he would continue in office until the Cabinet approved his resignation. The Iraqi List is led by former Prime Minister Ayad Allawi, a secular Shiite. The group holds 25 seats in the 275-seat parliament. Ali al-Dabbagh, spokesman for Prime Minister Nouri al-Maliki, said al-Shebli quit before he could be fired in a coming government reshuffle. Neither al-Dabbagh nor al-Shebli would say if the minister had resigned over the Kirkuk issue. In late February, Turkish Prime Minister Recep Tayyip Erdogan said Iraq should delay the Kirkuk referendum because the city was not secure. Turkey fears Iraq's Kurds want Kirkuk's oil revenues to fund an eventual bid for independence that could encourage separatist Kurdish guerrillas in Turkey, who have been fighting for autonomy since 1984. That conflict has claimed the lives of 37,000 people. Al-Shebli said local authorities in Kirkuk would begin distributing forms soon to Arab families to determine who would participate in the relocation program. He said he could not predict how long the process would take. Planning Minister Ali Baban said the relocation plan was adopted over the opposition of Sunni Arab members of the Shiite-led government, members of the Iraqi List and at least one Cabinet minister loyal to radical Shiite cleric Muqtada al-Sadr. "We demanded that the question of Kirkuk be resolved through dialogue between the political blocs and not through the committee," he told the AP earlier this week. "They say the repatriation is voluntary, but we have our doubts." Osama al-Nujaifi, a Sunni lawmaker with the Iraqi List, also denounced the decision, saying it fails to address key issues, including how to deal with property claims. "There are more than 13,000 unsolved cases before the commission in charge of this point and it just solved no more than 250 of them," he said of the property claims. "The other thing is the huge demographic change in Kirkuk as more than 650,000 Kurds have been brought in illegally over the past four years. We contest these resolutions and we will raise to the parliament to be discussed." Also Saturday, figures complied by the AP showed that the U.S. military death toll in March, the first full month of a new security crackdown, was nearly twice that of the Iraqi army, which American and Iraqi officials say is taking the leading role in the latest attempt to curb violence in the capital, surrounding cities and Anbar province. The AP count of U.S. military deaths for the month was 81, including a soldier who died from non-combat causes on Friday. Figures compiled from officials in the Iraqi ministries of defense, health and interior showed the Iraqi military toll was 44. The Iraqi figures showed that 165 Iraqi police were killed in March. Many of the police serve in paramilitary units. According to the AP count, 3,246 U.S. service members have died in Iraq since the war began in March 2003.