* Politicians and auto industry agree diesel recall -sources
* Around 9 million diesel vehicles to be updated -sources
* Recall plan designed to avert diesel bans by cities -sources
* Audi announces recall, software updates (Adds number of vehicles to be updated, details)
BERLIN, July 21 (Reuters) - Car industry officials and politicians in Germany have agreed to update the engine software of around 9 million diesel cars as part of a plan to avoid bans on diesel vehicles in major cities, industry and government sources said on Friday.
After Volkswagen admitted to emissions-test cheating in 2015, the entire auto industry has come under scrutiny for producing nitrogen oxide emissions in diesel cars, which are blamed for causing respiratory disease.
Carmakers are under pressure from international regulators and local politicians in Germany to clean up their diesel emissions or face bans on diesel engine vehicles.
The software updates will cost under 2 billion euros ($2.33 billion) for cars in Germany, with the auto industry agreeing to shoulder the expense of about 100 euros per car, the sources said.
Diesel-engine cars from all domestic and foreign car brands equipped with engines designed to meet Euro-6 and Euro-5 emissions standards, will be updated, the sources said. The plan is set to be presented at the beginning of August.
With the software updates, the auto industry is able to cut nitrogen oxide pollution by about 20 percent, the sources said. The updated software would mean the exhaust filtering systems work more effectively, helping to remove more of the harmful emissions.
A committee will be set up to measure the impact of updating diesel cars on individual communities and cities, with a view to averting bans of diesel cars, the sources said.
Auto industry executives and German Transport Minister Alexander Dobrindt are due to discuss diesel pollution at a summit on August 2.
Luxury car maker Audi, a division of Volkswagen, said it would update engine software on up to 850,000 diesel-engine cars. The refit of six and eight cylinder engines will be free of charge for all customers, Audi said.
Audi's plan follows a similar move by Daimler last week, which said it would spend 220 million euros updating more than 3 million European Mercedes-Benz cars with diesel engines.
BMW said it saw no need for a voluntary recall ahead of the August diesel summit.
European Union commissioner for industry, Elzbieta Bienkowska has written to Europes transport ministers threatening to ban diesel vehicles unless these are cleaned up by the year end, Germanys Sueddeutsche Zeitung said. The European Commission declined to comment. ($1 = 0.8593 euros) (Reporting by Markus Wacket in Berlin; Additional reporting by Yun Chee in Brussels; Writing by Edward Taylor; Editing by Georgina Prodhan and Jane Merriman)