The Iraqi Prime Minister Nouri al-Maliki has urged Kurdish authorities in northern Iraq to hand over Iraq's Sunni Vice-President, Tariq al-Hashemi.
An arrest warrant was issued for Mr Hashemi on Monday over terror charges.
Tariq al-Hashemi is Iraq's most senior Sunni Arab politician. He says the allegations are "fabricated".
Mr Hashemi is currently in the region of northern Iraq controlled by Kurdish authorities. The warrant was issued a day after US troops pulled out.
The US Vice-President Joe Biden has urged Iraqi leaders to work together to avert renewed sectarian strife.
At a news conference broadcast live on Iraqi television, Mr Maliki, a Shia, said he would dismiss ministers belonging to the main Sunni political grouping, Iraqiyya, if they did not lift their boycott of parliament and cabinet.
Barely had the last American soldier stepped across the border into Kuwait than the fragile Iraqi political structure the US military left behind began to fall dangerously apart, as long-standing tensions between Shia and Sunni political leaders came to a head.
Iraq's most senior Sunni Arab politician, Tariq al-Hashemi, is effectively a fugitive. While he hides out under Kurdish protection in the north, the entire al-Iraqiyya political bloc to which he belongs has pulled out of both parliament and the cabinet.
That paralyses Sunni participation in the hard-won power-sharing deal that underpins a year-old national unity government which has rarely pulled together. Frantic efforts are now under way to try to hold that structure together.
The alternative, at its direst, could be the country's de facto partition, as part of a wider regional Balkanisation along sectarian lines.
Rift endangers unity government
Iraqiyya - which was already boycotting parliament in protest at Mr Maliki's alleged authoritarian manner - has suspended its ministers' participation in cabinet in response to the arrest warrant for Mr Hashemi.
The prime minister offered an invitation to all political factions to hold talks to try to resolve the crisis.
But if that did not work out he said that in the future Iraq could have a majority government which any person or bloc would be welcome to join, to "take the country forward in a positive direction".
Asked about Mr Hashemi's call for the Arab League to oversee any process against him, Mr Maliki said this was a criminal issue in Iraq. He saw no reason why the Arab League or the United Nations should intervene in an Iraqi criminal case, he said.
"We do not accept any interference in Iraqi justice," he said. "We gave Saddam a fair trial, and we will give Hashemi a fair trial too."
Mr Hashemi denies the claims that he paid his bodyguards to kill during Iraq's bloody insurgency.
On Monday evening Iraqi television showed purported confessions from his bodyguards, but the vice-president says that they were false and "politicised".
Mr Hashemi said he was ready to defend himself against accusations of terrorism
He told reporters on Tuesday: "I swear to God that I never committed a sin when it comes to Iraqi blood."
He said he would be willing to face trial in Kurdistan.
Mr Maliki's news conference came after he had spoken on the phone to Mr Biden.
The US vice-president "stressed the urgent need for the prime minister and the leaders of the other major blocs to meet and work through their differences together," the White House said.
BBC
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