In the clashes near Najaf, an estimated 41 insurgents were killed, according to the U.S. military. U.S. soldiers seized the local governor's offices, located on the outskirts of the city, in the boldest move against the insurgency headed by cleric Muqtada al-Sadr, Reuters reported.
"We have resecured the governor's building and we intend to have the governor reoccupy it to have the coalition retake control of the city," a senior U.S. official said.
Meanwhile, U.S. administrator in Iraq, Paul Bremer, named Adnan al-Sharifi as the new governor for Najaf.
"The people of the Middle Euphrates are eager for a return of normal life. They are gong to have it," said Bremer, calling al-Sadr an outlaw.
Al-Sadr's militia reportedly was launching a counterattack against the coalition forces.
"We are getting contact (attacks) from all sides and we are dealing with it now. I would liken it to a hornet's nest," Lt. Col. Pat White, a U.S. officer, told CNN.
Also, American forces moved to the east of Najaf across the Euphrates River near Kufa, where about 40 insurgents were killed. When the rebel fighters moved out of a mosque and fired rocket-propelled grenades, mortars and rifles, U.S. soldiers killed about 20 insurgents, according to White.
U.S.-led troops have been fighting al-Sadr's militia in Karbala, Diwaniya and in Sadr City in Baghdad, where ten insurgents were killed overnight.
Coalition spokesman U.S. Army Brig. Gen. Mark Kimmitt, said the U.S.-led soldiers were not pushing into the holy Iraqi city of Najaf.
"We're not going to go wading into Najaf, we know how sensitive it is," Kimmitt told Reuters.
The attack in Baghdad, carried out by a suicide bomber driving an orange-and-white taxi, killed one U.S. soldier and five Iraqis. The bomb detonated at the entrance checkpoint outside the U.S. headquarters in the so-called Green Zone.
The bombing injured 25 people, including two American soldiers. According to U.S. officials, the attack resembled the bombings of Abu Musab al-Zarqawi, an ally of Osama bin Laden.
The solder killed in Thursday's bombing was the 21st U.S. soldier killed in May.