Prime Minister Haider al-Abadi and a Shiite-dominated force that helped Iraq fight jihadists have agreed to stand separately in elections, a source said Monday, a day after announcing an alliance.

Abadi is hoping to secure another term in the May 12 parliamentary elections after declaring victory over the Islamic State group and thwarting an Iraqi Kurdish bid for independence.

Abadi's list will face the "State of Law" bloc of Nuri al-Maliki, his predecessor, key rival and Shiite Dawa party co-member who is now vice president.

On Sunday, Abadi said he had persuaded the Hashed al-Shaabi paramilitary force which helped fight IS to join his "Victory Alliance" which he described as a "cross-sectarian" list.

The Hashed al-Shaabi, or Popular Mobilisation Units, is seeking to become a key political player in Iraq as well as military after proving itself to be a formidable force on the battlefield.

But their alliance collapsed within 24 hours of being announced because of what a source close to the premier said was electoral reasons.

"The removal from the list of certain groups (led by the Hashed) is due to the fact that they could not comply with the conditions that the prime minister had sought," the source told AFP.

"Their conditions diverge from those of Haider al-Abadi, who on one hand wants people qualified for their positions and not chosen according to denominational criteria, and on the other hand candidates who support his anti-corruption measures."

"Mr Abadi wants to choose nationalists who share his national vision in accordance with the wishes of Iraqis," the source added.

The main groups representing the Hashed have decided to stand jointly under the banner of the Fatah coalition.

One Fatah leader, Falah al-Khazali, has spoken out against running alongside Abadi's list after accusing it of including "groups involved in the corruption".

Others chose to withdraw from the alliance with Abadi because they believe they will secure more seats by running on a smaller list.

Abadi was little known when he became prime minister three years ago, after Maliki ceded power to him in August 2014 amid political and sectarian chaos and a sweeping offensive by IS.

Abadi declared victory in December in the three-year war by Iraqi forces to expel IS jihadists from the vast areas north and west of Baghdad.

Since taking over, Abadi has also rebuilt the crumbling armed forces, taken back disputed areas in the north from the Kurds and torpedoed their hopes for independence.

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