After talks with Iraqi military and political officials, the vice president said Iraq's leaders seem to have a better sense now that they need to do more to reconcile sectarian and political differences.
"I think they recognize it's in their interests as well as ours to make progress on the political front," Cheney said.
"They do believe we are making progress but we have a long way to go," the vice president said.
Cheney spoke less than an hour after an explosion could be heard in the U.S. Embassy where he spent most of the day. Windows rattled and reporters covering the vice president were briefly moved to a more secure area.
Said Cheney spokeswoman Lea Anne McBride: "His meeting was not disturbed and he was not moved."
Asked about security in Baghdad, Cheney told reporters, "I have to reply on reports, because obviously I spent the day here basically in our embassy in the Green Zone."
But he said based on conversations he had throughout the day, Iraqi leaders felt that sectarian violence was "down fairly dramatically."
"I think everybody recognizes there still are some security problems, security threats, no question about it," Cheney said.
In Washington, White House counselor Dan Bartlett said President Bush wanted Cheney to travel to Baghdad to press upon Iraqi leaders the need to quickly pursue reconciliation measures and meet the benchmarks set by them and Washington.
"This gives an opportunity at a very high level for this message to be delivered," Bartlett said.
The White House also said Bush would veto any bill drafted by House Democratic leaders that would fund the Iraq war only into the summer months. Defense Secretary Robert Gates said such short-term funding would be very disruptive and "have a huge impact" on contracts to repair and replace equipment.
Earlier, Cheney met with Iraqi Prime Minister Nouri al-Maliki. The prime minister said they discussed "practical steps ... to support our efforts working on both the security front as well as the domestic political issues."
Al-Maliki is coming under increasing pressure from Washington to demonstrate progress in easing sectarian violence, and Cheney's unannounced visit to Iraq was depicted by U.S. officials as an attempt to press al-Maliki and other Iraqi leaders to do more to achieve reconciliation among factions.
Cheney said that much still must be done by Iraq to reconcile differences.
"I do sense today that there is a greater awareness on the part of these Iraqi officials I talked to of the importance of their working together to resolve these issues in a timely fashion," he said.
Cheney also said that, while he didn't want to butt in on domestic legislative issues, he did make Iraqi leaders aware of U.S. concerns about talk of a two-month summer recess. With many pending important issues, including how to share oil revenues, "any undue delay would be difficult to explain," Cheney said.
Echoing officials in Washington, Cheney rejected Democratic proposals that would provide only short-term money to pay for war efforts.
Cheney said efforts to restrict funds resulted in the first Bush veto and that the administration still believes that spending for operations in Iraq should "not contain conditions that limit the flexibility of our commanders on the ground in Iraq or interferes with the president's constitutional prerogatives."
Appearing before reporters with Cheney, Gen. David Petraeus, commander of coalition forces in Iraq, cited progress on the ground in reducing sectarian violence, especially in volatile Anbar Province. Still, he said, he still believes that the conflict in Iraq will continue to require a substantial U.S. commitment.