Eight Iraqis were killed in the clashes yesterday inSadr City, a vast slum outside Baghdad. The fighting follows the upsurge of violence faced by British forces in the Shia south.
For more than a year the vast majority of attacks on coalition forces have been carried out by Sunni insurgents. However Mr Sadr has formed an alliance with Sunnis to oppose the country's new constitution and his paramilitary Mehdi Army has been increasingly active against American and Iraqi government forces.
Yesterday's fighting erupted before dawn when a US patrol came under fire as it entered Sadr City. Police said that eight gunmen were killed and five more injured. However, a senior Sadr aide insisted that five of the dead were civilians and included a woman.
Elsewhere, a suicide car bomber struck at an interior ministry convoy in Baghdad, killing nine people, while an armed gang escaped with around £425,000 in Iraqi dinars after ambushing an armoured car carrying cash from the finance ministry.
Police said that they had found six bodies in the capital. One of them was a female in her twenties who had been tortured before being strangled. Police also said that an armed gang had kidnapped a Baghdad school principal on his way to work.
Meanwhile a mortar bomb targeting an Iraqi army checkpoint in western Baghdad wounded four Iraqi soldiers.
In Samarra, 95km (60 miles) north of Baghdad, three mortar bombs landed in a residential district. One mortar bomb hit a house, killing seven members of one family, including a number of children.
A bomb at Hillah, a mixed Sunni-Shia city, killed a woman and child and injured 48 people. The blast had targeted a market place where, conservative Shia clerics have claimed, "unIslamic" music was being sold. In another sign of a Shia-Sunni alliance against the constitution, around 1,000 people marched through the town of Ramadi, west of Baghdad, carrying pictures of Saddam Hussein and Sadr.
The referendum on the constitution is due to be held in three weeks' time. Grand Ayatollah Ali al-Sistani, the spiritual leader of the Shias, repeated his call yesterday for the community to vote "yes" in the referendum.
At the same time, Sunni religious and political leaders have been urging their community to register to vote - since most boycotted elections in January and are therefore not on the electoral register - and to vote "no" on 15 October.
In Basra, senior Shia public figures stated that they would not lift their ban on co-operation with British forces which followed last week's disturbances. They also declared that a warrant issued for the arrest of two special forces soldiers, who were held by Iraqi police before being freed by a British force, would not be rescinded.