WASHINGTON - The defense bill President Barack Obama will sign into law on Wednesday contains a new provision that would pay Taliban fighters who renounce the insurgency, Senate Armed Services Committee Chairman Carl Levin said on Tuesday.

The provision establishes a program in Afghanistan similar to one used in Iraq where former fighters were re-integrated into Iraqi society, Levin told Reuters.

Obama plans to sign the bill authorizing Pentagon operations for fiscal 2010 on Wednesday, the White House said.

Reaching out to moderate Taliban members is part of the Obama administration's plan to turn around the eight-year war in Afghanistan. Levin also has advocated trying to convince Taliban fighters to change sides by luring them with jobs and amnesty for past attacks.

Under the legislation, Afghan fighters who renounce the insurgency would be paid for mainly protection of their towns and villages, Levin said.

It would be just like the sons of Iraq, he said, referring to the program used in Iraq which military commanders say helped turn around a failing war.

You got 90,000 Iraqis who switched sides, and are involved in protecting their hometowns against attack and violence. L

The bill authorizes using money from an existing Commanders Emergency Response Program, which U.S. commanders can use for a variety of purposes. It does not set a specific dollar amount for the fighters' re-integration program.

There is $1.3 billion authorized for the fund in fiscal 2010, which began October 1. The money must still be allocated by defense appropriators, who are working to finish the legislation.

As part of his overall strategy review on Afghanistan, Obama is debating whether to send more U.S. troops to the region and is set to meet on Friday with Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, and the heads of the military services, the White House said.

The meeting was probably getting toward the end of Obama's decision-making process, said White House spokesman Robert Gibbs.

The Joint Chiefs office recently completed an internal assessment of the two leading proposals for troop levels in Afghanistan.

These were sending roughly 40,000 additional troops, as his commander for Afghanistan, General Stanley McChrystal, has recommended, or a far smaller number, an option McChrystal and other defense officials see as having a higher risk of failure.

(Additional reporting by Steve Holland, Adam Entous and Patricia Zengerle; editing by Chris Wilson)

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