Some form of curfew has been in place since the US-led invasion to topple Saddam Hussein in 2003, hindering commercial and civilian movement. The midnight (2100 GMT) to 5 a.m. curfew has been in place for more than seven years.
Deadly attacks remain a regular occurrence in Baghdad. Four bombs went off in a central district on Tuesday, killing nine civilians and wounding 25 others. At least 12 people were killed on Friday by bombs at a busy market.
But Abadi's spokesman Rafid Jaboori told Reuters, "Baghdad was under real threat only a few months ago, but now Baghdad is secure enough ... to lift the night-time curfew."
"Life goes on although Iraq is at war and is aiming to liberate the rest of the country," he said.
Islamic State looked set to attack Baghdad in mid-2014 after sweeping towards the capital from the north and west but Kurdish fighters and Shi'ite militias pushed back the radical jihadist group, reducing but not eliminating the threat.
While much of Iraq remains out of Abadi's direct control, inside the capital he has empowered the police to arrest wayward militia members suspected of kidnapping civilians and has sought to ban armed convoys parading through Baghdad.
Interior Ministry spokesman Brigadier General Saad Maan told Reuters that demilitarizing the Khadimiya, Adhamiya, Mansour and Saidiya districts meant heavy weapons would be banned, some checkpoints would be closed and local security forces rather than national security units would make arrests in those areas.
Checkpoints along major roads and at the entrance to most neighborhoods have become a fact of life for Baghdad residents, creating long lines of traffic while politicians' convoys speed through the city with armed guards who act with impunity.
Abadi ordered a separate neighborhood demilitarized last weekend after heavily armed gunmen protesting against an alleged kidnapping clashed with security forces.