The Kurdistan Regional Government has offered to suspend its drive for independence in return for a promise from Iraq to halt its military activity, which has seen it seize huge swathes of territory in recent days.
The KRG said it was prepared to "freeze" the results of its September referendum and proposed a ceasefire to prevent further violence, which has so far seen scores killed and tens of thousands displaced.
“As Iraq and Kurdistan are faced with grave and dangerous circumstances, we are all obliged to act responsibly in order to prevent further violence and clashes between Iraqi and Peshmerga forces,” the KRG’s statement said.
They called for dialogue with Baghdad in the hope of easing escalating tensions.
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The KRG made the offer as Iraqi forces looked on Tuesday to be moving in on its border with Turkey, which is currently in Kurdish hands. Its loss to Baghdad would be devastating for Kurdistan’s autonomy and economic independence.
The offer to suspend the result of the referendum on secession - which won the support of 93 per cent of voters - is a humiliating blow for Kurdistan’s President Masoud Barzani, who defied international pressure to hold the vote.
Iraq's Kurds were last month celebrating their symbolic victory as a historic step toward their decades-old dream of statehood.
But by last week they had lost almost all the territory they had gained from Iraqi forces in recent years which lay outside their long-standing three-province autonomous region in the north.
The forces were met with little resistance by their Peshmerga fighters, who withdrew without putting up a fight.
There was no immediate reaction from Baghdad to Wednesday’s offer but the Hashed al-Shaabi (Popular Mobilisation) force, whose mainly Iran-trained Shia paramilitaries played a major role in the operation against the Kurds, said a freeze did not go far enough.
One Iraqi MP told the Telegraph Prime Minister Haider al-Abadi may demand the outright annulment of the vote before talks could take place.
The United Nations said that it stands ready to broker talks. Jan Kubis, UN envoy, "expressed confidence that despite the recent tensions, Iraq will be able to ride this crisis".
"Both sides publicly expressed their willingness to engage in dialogue and negotiations on the basis of the Constitution. The UN is ready to assist, if requested," he said.