Hundreds have died in the clashes that appear to have scuttled a truce brokered two months ago between the two sides.
Gunfire has reportedly raged since before dawn on Thursday in Najaf, as militants hid in a cemetery near the city's center. Smoke could be seen rising from the area, which is near the Imam Ali Shrine, one of the holiest sites to Shiite Muslims.
Two marines have been killed and 12 wounded in Najaf, 100 miles south of Baghdad, American military commanders in charge told the New York Times. Another U.S. military official reported that U.S. forces have killed about 300 Iraqi militants loyal to al-Sadr. Those numbers were not independently confirmed, however.
"The number of enemy casualties is 300," killed in action, Lt. Col. Gary Johnston, operations officer for the 11th Marine Expeditionary Unit said in a Reuters report.
A spokesman for al-Sadr disputed the American report, saying 36 members of the militia had died.
At least 13 civilians have been killed and 58 others wounded in the past two days in Najaf, according to Najaf General Hospital officials.
In Baghdad's Sadr City, a Shitte slum region, U.S. airstrikes killed 19 people and wounded 111, according to the Health Ministry. Attacks in the area left 15 U.S. soldiers wounded, the AP reported Friday.
In Amarah, a city 180 miles southeast of Baghdad, militants captured four police stations.
Fighting also broke out in Samarra, a city northwest of Baghdad, and Nasiriya in the south. Six have been killed and 13 wounded in Nasiriya. Militia members attacked Italian troops in that region, according to an Italian military spokesman, the AP reported.
Both sides blamed each other for breaking the cease-fire agreement put in place to end a similar uprising against U.S. and coalition forces that began in April. The U.S. military accused the rebels of continuing to attack police in Najaf while al-Sadr's milita, the Mahdi Army, accused the U.S. forces of surrounding al-Sadr's residence on Monday.
"We hold the American troops and the governor of Najaf totally accountable for the state the crisis has reached to now," said Mahmoud al-Sudani, a spokesman for al-Sadr.
Al-Sadr called for a rebellion against American and coalition forces on Thursday, but since has called on the United Nations and the interim Iraqi government to stop the battles.
"From our side we did not want to escalate the situation, because the situation in Najaf affects that of other Shiite area," al-Sudani said. "But the actions of the American troops have enraged the sons of these cities."
But Iraq's interim government said they would continue to fight the independent militias as long as they continued to exist.
"The militias are considered criminal and terrorist groups that we do not condone and that we will fight," said George Sada, spokesman for interim Prime Minister Ayad Allawi. "We will fight them and will not allow their criminal actions in the various cities, irrespective of who they are of how big they are."
At least 921 U.S. service members have died since the beginning of Iraq operations in March 2003, according to the Defense Department.