BAGHDAD - The surprise release of a Shiite extremist linked to the killing of five U.S. soldiers in Iraq is part of a high-stakes gambit that could result in freedom for five British hostages and a political role for a major Shiite extremist group with reputed ties to Iran.

Laith al-Khazali, a leading figure in the Asaib al-Haq, or League of the Righteous, was freed from U.S. custody over the weekend and taken to his home in Baghdad's Sadr City district, according to Iraqi officials involved in negotiations for his release.

Khazali and his brother Qais were arrested in March 2007 and accused of organizing a bold raid on a local government headquarters in Karbala that killed five U.S. soldiers on Jan. 20, 2007.

Danny Chism, whose son, Spec. Johnathan Bryan Chism, was among the Americans killed, was outraged that Khazali had been released. "Somebody needs to answer for it," he said from his home in Donaldsonville, La.

But the case of the Khazali brothers has morphed beyond the Karbala attack into a major political issue, involving the British government and Iraq's Shiite-led government attempting to resolve differences with rival Shiite factions.

Two months after the Khazali brothers were arrested, gunmen believed to be from the group seized British management consultant Peter Moore and four of his bodyguards from the Finance Ministry compound in central Baghdad.

Secret talks have been under way for months for their release in exchange for freedom for the Khazali brothers and others from the League of the Righteous, one of the Shiite "special groups" that the United States believes Iran backs.

The U.S. military declined comment on the release and referred questions to the Iraqi government, which described the move as part of "reconciliation efforts."

"His release is part of the national reconciliation effort," government spokesman Ali al-Dabbagh said. "We are not part of these negotiations, but we do support the release of the hostages."

A British Foreign Office spokesman said the release was part of "the wider Iraqi government reconciliation process of reaching out to groups that are willing to set aside violence in favor of taking part in the political process."

In Washington, Pentagon spokesman Bryan Whitman said the United States handed over Khazali to the Iraqi government and was not involved in his final release. Whitman said the Iraqis told the United States that the release was not part of any broader negotiations.

Iraqi lawmakers and others with links to Shiite extremists said the release was part of a complex series of contacts aimed at releasing the British hostages and offering the League of the Righteous a political role in return for abandoning violence.

Portraying the ultimate goal as abandoning violence makes the process more politically acceptable than a simple hostage trade with an extremist group.

The lawmakers and others spoke on condition of anonymity because the issue is sensitive.

They said the kidnappers had agreed to free the hostages in stages in exchange for a phased release of league members, starting with Laith Khazali.