The proposal crafted over the course of two years was endorsed by ICANN in March.
The US administration on Thursday endorsed a plan to cede its oversight of the gatekeeper of Internet addresses to the broader online community.
Commerce Department assistant secretary for communications and information Lawrence Strickling told AFP that the proposal from the Internet Corporation for Assigned Names and Numbers (ICANN) meets the criteria set by the US administration.
The plan aims to maintain Internet governance under a "multi-stakeholder" model which avoids control of the online ecosystem by any single governmental body.
"The Internet's multi-stakeholder community has risen to the challenge we gave them to develop a transition proposal that would ensure the Internet's domain name system will continue to operate as seamlessly as it currently does," Strickling said.
US oversight of ICANN had "irritated" some governments, which used what was Strickling depicted as a mainly clerical responsibility to vie for greater control of the Internet.
The plan comes in response to the US government's March 2014 announcement that it would transition "stewardship" of online domain name system technical functions from the Commerce Department to a body that would fairly represent all parties with interests in a vibrant and healthy Internet.
Motivation behind the transition is to "preserve a free and open Internet," according to Strickling.
Concern has been expressed over the years that a perception that the United States is holding the reins of the Internet could prompt other countries to form their regional "domains," creating a potential for fragmentation.
The proposal crafted over the course of two years with input from businesses, academia, governments and others was endorsed by ICANN in March.
Strickling declined to call his agency's report endorsing the plan an "approval," referring to it instead as a favorable "assessment."
The proposed new system is being tested in parallel with the existing one to see if it works on a practical level.
The plan will not affect how users interact online, but will turn over the technical supervision of the online address system to ICANN itself, with a system of checks and balances so no single entity can exert control over the Internet, according to officials involved in the process.
Officials say the US government supervision is symbolic and dates back to the creation of the Internet. Yet ICANN officials maintain the new governance model will instill confidence around the world in the Internet's independence.
If the US government formally approves the plan, then a contract between ICANN and the US government will be allowed to naturally expire on September 30.
ICANN board chairman Stephen Crocker told AFP in an earlier interview that he did not expect Internet users to notice any change.
But some US lawmakers have been less than enthusiastic about the plan.
Last year, Republican Senator John Thune warned at a hearing that a privatized ICANN could become "accountable to no one."
Strickling said his agency is prepared for discussions with lawmakers to get them comfortable with the plan.
"To the extent that people think the US has been the guardian of the free and open Internet, I think, overall, we have relied on the community," Strickling said.