A British contractor seized by suspected freedom fighters six days ago was freed, raising hopes for other foreign hostages still being held. An unidentified negotiator told Japan three kidnapped Japanese civilians were safe, Kyodo news agency said.
Some 60 US and allied troops have died in the past week in Iraq's bloodiest and most chaotic period since the fall of Saddam Hussein a year ago.
"This violence we've seen is part of a few people trying to stop progress toward democracy," he said, sticking to his declared policy of handing power back to Iraqis on June 30 despite critics suggesting he faces a Vietnam-style quagmire.
US-led forces were pitched into a new front last week against radical Shia cleric Moqtada al-Sadr's Mehdi Army militia as well as a long-running battle with Sunni guerrillas.
The US military said eight soldiers had been killed by Iraqis in the past 48 hours. Iraqis also shot down a US Apache helicopter near Baghdad airport, killing the crew.
Only sporadic gunfire crackled through Falluja, west of Baghdad, after the truce.
Iraq's US Governor Paul Bremer said no terms had been imposed on the freedom fighters in Falluja, where Iraqi mediators have talked to town leaders and guerrillas for the past two days.
A representative of Iraq's US-appointed Governing Council negotiating with the rebels said the 12-hour truce, which began at 10 am (0600 GMT), had been extended for a further 12 hours and that talks would resume on Monday.
"We reached an agreement to stop the bloodshed until tomorrow morning in order for us to come back to Falluja to try and stop the bloodshed permanently and completely," Hashim al-Hassani told Reuters in Falluja.
Rafa Hayad al-Issawi, director of Falluja's main hospital, said: "I would say more than 600 (Iraqis) have been killed, but the number may not be absolutely accurate because many families have already buried their dead in their gardens."
Desperate families took advantage of the truce to flee combat zones in the town of 300,000. Sunni fighters, who have battled US troops from street to street, remained inside.
Fifteen food trucks reached Falluja with banners saying they were a gift from a Baghdad stronghold of Sadr, who launched an anti-US revolt across Iraq a week ago. US and Iraqi authorities want to arrest him in connection with a murder.
The truck convoy was the latest of several shows of solidarity between Iraq's majority Shia and minority Sunnis against the US-led occupation in the past week.
US Marines attacked Falluja, a bastion of freedom struggle, last week in response to the murder and mutilation of four American private security guards ambushed in the town.
Freedom fighters holding a US civilian, Thomas Hamill, said they would execute him unless the US siege of the town was lifted.
The freed British contractor, Gary Teeley, was handed over to US-led forces on Sunday, but no details were immediately available on how he had been freed or who had handed him over.
"He is in the hands of American and Italian forces in Nassiriya as we speak," said a senior source in US-led forces.
In London, a British Foreign Office spokesman said Teeley, 37 and a father of five who had been missing since last Monday, was "safe and well".
Kyodo quoted an unnamed Japanese government official for its report that the three Japanese hostages in Iraq were safe.
Japanese Prime Minister Junichiro Koizumi was confronted with the biggest test of his political career when a previously unknown group released a video of the three on Thursday and threatened to kill them unless Japan withdrew troops from Iraq.
Koizumi rejected the demand, saying his government would not give in to terrorism.
US plans to hand power to an interim Iraqi government on June 30 may involve expanding the Governing Council, but the present crisis has triggered strains in the council.
"A lot of us here in Baghdad and elsewhere were appalled by the loss of life and destruction (in Falluja) because there was too much force used," Council member Adnan Pachachi told the BBC, adding negotiation or pressure could have been employed.