A ceremony is being held in Basra to mark the official end of the six-year British military presence in Iraq.
UK combat operations will finish when 20 Armoured Brigade hand over to a US brigade at a "flagdown ceremony".
In London, Prime Minister Gordon Brown said a new chapter in relations between the two countries had begun.
Earlier, a memorial service attended by Defence Secretary John Hutton took place in Basra for the 179 UK personnel who have died during the conflict.
The focus was a memorial wall featuring the names of the 234 UK and foreign troops who lost their lives while serving under British command in Iraq.
British forces began their official pull-out last month when the UK's commander in the south of the country, Maj Gen Andy Salmon, handed over to a US general.
They took a step closer to withdrawal at the start of the year when Basra International Airport - used as a UK military base during the conflict - was passed to full Iraqi control.
The end of combat operations comes a month ahead of schedule.
Mr Brown, who held talks with Iraqi counterpart Nouri al-Maliki at Downing Street, said: "Today Iraq is a success story. We owe much of that to the efforts of British troops. Our mission has not always been an easy one, many have said that we would fail.
"Britain can be proud of our legacy that we leave there."
The names of those who died on the UK's Operation Telic were read out at the memorial service, which included Italian, Dutch, Danish, American and Romanian troops.
Army chaplain Father Pascal Hanrahan, who opened the ceremony, said: "Today is about remembrance and thanksgiving.
"We remember by name and acknowledge the ultimate sacrifice paid by the 234 men and women who lost their lives during Operation Telic."
The last post was sounded by a bugler and prayers were said. There was also a roar overhead as a lone Tornado aircraft conducted a fly-past in tribute.
Lt Col Edward Chamberlain, commanding officer of Iraq-based battalion 5 Rifles, said: "We've been slowly working, as part of a coalition together over the six years, to achieve an end-state which is an Iraq which is secure, happy, at peace with itself and its neighbours.
"We're slowly but surely transitioning towards that."
Mr Hutton said the UK should be proud of what its troops had achieved.
"It's been a long and hard campaign. There's been no question about that, and we've paid a very high price," he said.
"And the families of those who've lost loved ones here today will be thinking very hard about that - and we should all as well.
"But I think when the history is written of this campaign, they will say of the British military 'we did a superb job', as we would expect them to, and we should be very proud of what they have done here."
Opposition leader David Cameron has called for an immediate full inquiry into the Iraq war, similar to the one carried out by the Franks Committee into the Falklands conflict.
He said: "The departure of British forces from Iraq is now imminent.
"Now, after years of foot dragging, I believe it is the time for the government to announce a proper Franks-style inquiry. Instead of starting in many months' time, it should start right now.
"There are vital lessons to learn and we need to learn them rapidly and the only justification for delay can, I'm afraid, be a political one."
BBC News defence correspondent Caroline Wyatt says there is a sense of relief for many British servicemen and women that their final tour of Iraq is winding down.
Some are now serving on their fourth tour, taking them away from home for two years out of the last six.
Our correspondent says many of them will look back with mixed emotions.
Southern Iraq is more peaceful than it was a year ago but when British forces invaded Iraq as part of the US-led coalition in 2003 few people imagined troops would still be in the country six years later.
As British forces prepare to leave Iraq, senior commanders admit they have learned lessons from the campaign.
It was a conflict that showed the strengths and weaknesses of the British armed forces.
There were acts of great heroism but also a force that came under great strain, fighting on two fronts - in Iraq and Afghanistan.
Asked about the UK presence in Iraq, the country's president, Jalal Talabani, told BBC News: "This is a mission of liberation. For the first time British forces in Iraq are playing this role.
"In the past the British forces came to occupy against the will of the Iraqi people. This time they came here to liberate Iraqi people from the worst kind of dictatorship."