WASHINGTON (CNN) -- Attacks are down 75 percent in recent months in a perilous stretch of neighborhoods in northeastern Baghdad, prompting a U.S. military officer to proclaim Monday that security there is "dramatically improving."

Concerned citizens have helped troops improve security in parts of Baghdad, a military official says.

People line the streets, cars congest them, trash collectors and other city workers have returned, local leaders are holding community meetings again and "markets have come back like gangbusters," said Army Col. Don Farris, commander of 2nd Brigade Combat Team, 82nd Airborne Division.

He added that the largely Sunni al Qaeda in Iraq presence has been "crushed" since the beginning of May.

However, there are still dangers, most notably the threats posed by Iranian-backed Shiite militants, Farris said.

Speaking to Pentagon reporters via video link from Baghdad, Farris cited several factors he said contributed to the improving security situation. Among them is the "surge," the additional U.S. troops deployed earlier this year.  Watch how old rivalries have been posing problems »

Also helping improve the security situation are the cease-fire by radical Shiite cleric Muqtada al-Sadr's Mehdi Army and the development of a program that employs "concerned local citizens" to assist U.S. and Iraqi forces, Farris said.

Some of those citizens are members of local Sunni "awakening councils," comprised of former militants -- often armed -- who create neighborhood watch groups to root out the insurgent elements in an area.

Especially in the last six weeks, Farris said, civic and religious leaders have seen outsiders operating in the area and troops have made arrests, two Iranian operatives among them

"From my foxhole, in our sector, it is working," he said of the improving security in the area. "I can only speak to what I see in my sector and I am encouraged."

Farris' sector -- which includes the Sunni-dominated district of Adhamiya and Sadr City, the Shiite slum where militants have demonstrated a strong presence -- has seen a "remarkable turnaround," he said.

Many of the communities in his area have been wracked with sectarian warfare and terrorized by insurgents and death squads.

Despite improvements in the security situation, Farris warned that "we still have a lot of work to do" because there doesn't appear to be any sign that Shiite extremists with links to Iran are halting their activities.

Farris said troops also are still finding explosively formed penetrators, which are often delivered or manufactured by Iran. Nine such bombs were found in late October, he said.

There are intelligence reports indicating weapons and money are still flowing into Sadr City, he said.

There are also problems returning refugees and displaced people to their homes in the area, Farris said, because "essential services" like water and electricity are not yet up to snuff.

Though a "trickle" of families has returned home and many are asking when they can return, Farris said he believes residents will return en masse only when basic services are in better shape.

Paul Folmsbee, a State Department provincial reconstruction team leader, said at the same news conference that his personnel was handling development issues involving law, governance, economic development and essential services.

Farris' Monday remarks echo a string of similar assertions made by U.S. and Iraqi military officials over recent weeks. The military officials say they are seeing signs of Sunni-Shiite reconciliation.

At a press conference earlier Monday in Baghdad, Brig. Gen. Ed Cardon, deputy commander for support of Multi-National Division-Center, discussed a "definite period of progress" in his region on the southern Baghdad outskirts. E-mail to a friend
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