Mr Prodi, addressing the Senate a day before a vote of confidence on his government, presented a platform that promises to reverse years of policies of his conservative predecessor, Silvio Berlusconi, both in domestic and international affairs.
"We consider the war and occupation in Iraq a grave error that hasn't solved - in fact, has complicated - the problem of security," Mr Prodi told parliamentarians.
"It is therefore the intention of this government to propose to Parliament a pullout of our troops," said Mr Prodi, drawing boos from the conservatives.
Mr Prodi did not give a timetable for the withdrawal of the remaining 2,600 Italian troops, which were sent in by Berlusconi after the ouster of Saddam Hussein in 2003 to help rebuild the country. But Parliament must vote on the financing of the mission by the end of June.
The Senate speech was the first since Mr Prodi took office on Thursday, when he submitted his Cabinet list to President Giorgio Napolitano and was sworn in along with his ministers. The changeover ended Berlusconi's conservative rule after five years.
Mr Prodi's government will face a vote of confidence in the Senate - where his coalition has a mere two-seat majority, and another one in the lower house. If it loses any of the votes, the government must resign.
Economic reforms
The toughest challenge facing the government is reviving the country's zero-growth economy, a task that Mr Prodi said required "an extraordinary effort."
"Our country needs a strong jolt, as does our production system. The government believes it has the right policies to this end," he said.
Italy's finances have been dragging due to high labour costs, lagging productivity and strong competition from Asia in such sectors as clothing and furniture.
The government needs to boost growth while cutting its debt and deficit to conform with European monetary union rules.
Mr Prodi renewed his campaign pledge to slash the payroll tax by five per cent during his first year in power, a move aimed at helping
Italian businesses regain a competitive edge.
Underscoring a sense of urgency, he said Italy needs to act quickly to take advantage of a recent economic upswing and insisted that only by restoring growth would it be possible to correct the country's creaky public finances.
In his Senate speech, Mr Prodi also said that an "ethical shock" was needed in a country where "a climate of tolerance and addiction to ethically reprehensible, if not outright illegal, behaviour, to sensational conflicts of interests ... has been produced" - an apparent reference to Berlusconi.
Mr Prodi also made a reference to a massive scandal that has engulfed Italy's favourite sport - soccer - and outraged the nation.
The premier appealed for unity, but at the same time vowed to either revise or undo some of the reforms put in place by the conservatives.
They include conflict-of-interest legislation, a contested labour reform that introduced some flexibility in the rigid Italian labour market and a tough immigration law that Mr Prodi described as "both demagogic and ineffective."