The United States on Friday handed its last prisoner in Iraq, a Hezbollah operative accused of plotting the killing of five US soldiers, to Iraqi authorities, sparking a political furor in Washington.

A complicated legal drama surrounded the fate of Ali Musa Daqduq, who confessed to training Iraqi extremists in Iran, as US troops end their mission and prepare to finally leave Iraq by the end of the month.

Some Republicans had called for Daqduq to be taken out of Iraq by US forces and sent to the US war on terror camp at Guantanamo Bay, which President Barack Obama has promised to close, and reacted angrily to his handover.

"We are continuing to discuss this case with the Iraqis, and as of this morning, he has been transferred to Iraqi custody," said National Security Council spokesman Tommy Vietor.

"We take this case very seriously, and for that reason have sought and received assurances that he will be tried for his crimes.

"We have worked this at the highest levels of the US and Iraqi governments, and we continue to discuss with the Iraqis the best way to ensure that he faces justice."

It is understood that Obama raised the case of Daqduq directly with Iraqi Prime Minister Nuri al-Maliki when he welcomed him to the White House this week.

Some Republicans had called for leaving US forces to simply bring Daqduq, a Lebanese national, with them as they left Iraq.

But officials said that would be illegal, under security agreements between the two governments, and would have fractured the new and "enduring" relationship with Iraq that Obama vowed this week to build.

But Obama's critics in Congress reacted angrily to news of the transfer of Daqduq. Senator John McCain called the move "disgraceful."

"The real test regarding Daqduq was not whether the United States should violate our security agreement with Iraq in order to maintain custody of him outside of the country," McCain said.

"The real test was whether the United States could exercise our influence effectively with the Iraqi government to ensure that a committed killer of Americans would be held accountable for his crimes in the US system of justice."

Daqduq had been held by US forces, but under the authority of the Iraqi government, under an agreement reached between the Iraqi government and the former US administration of president George W. Bush.

US-led forces captured Daqduq in 2007 and showed documents and names of 21 Iranian-backed militants who had been captured or killed while operating throughout Iraq.