The Iraqi government agreed to a deal brokered by al-Sistani, who arrived in Najaf Thursday to negotiate with representatives of rebel Shiite cleric Muqtada al-Sadr, whose Mahdi Army has refused to lay down its weapons and leave Najaf's sacred Imam Ali mosque.
Officials did not provide details of the agreement, but indicated that the thousands of followers who joined the 75-year-old ayatollah would be allowed to demonstrate on Friday as a prelude to some form of final resolution.
State Minister Qassim Dawoud, announced the government's acceptance of the deal, saying that U.S. forces will pull out of Najaf as soon as interim Prime Minister Ayad Allawi orders them to leave.
"Brothers, we have entered the door to peace," he said. He added that the government would not try to arrest al-Sadr, who was being sought for an alleged role in the slaying of a rival cleric last year.
Sistani had called on all Shiite civilians to mount a peace march to Najaf and save the shrine of Imam Ali. But just hours before his arrival in Najaf, Shiite marchers in Najaf and Kufa came under attack as they prepared to join the cleric's convoy.
In Kufa, a mortar barrage slammed into the town's main mosque filled with hundreds of Iraqi Shiites. The blasts killed 27 people and wounded 63, Mohammed Abdul Kadhim, an official at Furat al-Awsat hospital in Kufa, told the Associated Press.
Around the same time of the mortar attack, another group of Shiite demonstrators in Kufa came under fire from an Iraqi National Guard base. At least three people were killed and 46 wounded, the AP reported.
"This is a criminal act. We just wanted to launch a peaceful demonstration," Hani Hashem, bringing an injured friend to the hospital in Kufa, told the AP.
With all sides -- the U.S. military, the Iraqi government and al-Sadr -- backing al-Sistani's efforts, it was not known who opened fire or launched the mortar bomb in Kufa or whether it was an attempt to sabotage the latest peace initiative, the AP reported.
In Najaf, at least 15 al-Sistani supporters were shot dead and 65 wounded when unidentified gunmen opened fire at police who were trying to control a crowd, prompting police to shoot back, Reuters reported.
"Suddenly armed men joined our group and fired at the police. The police started firing everywhere," witness Hazim Kareem told Reuters at Najaf's hospital.
Fighting within the holy city, however, appeared to ease as the U.S. and Iraqi government's cease-fire took effect upon al-Sistani's arrival.
U.S. Rear Adm. Gregory Slavonic, a military spokesman, said the U.S. military would hold its fire for 24 hours "to see if this agreement will be adhered to by al-Sadr."
Interim Prime Minister Iyad Allawi declared the 24-hour cease-fire in Najaf "to reinforce our commitment to peace." Allawi expressed hope al-Sistani's peace efforts would succeed so the government would not have to resort to its long-threatened raid on the Imam Ali Shrine, an action that would likely provoke outrage from Shiites in Iraq and elsewhere in the Muslim world.
"I stress that this is the last call for peace and that this is the last chance to put an end to the spilling of innocent blood," Allawi said in a statement. "God willing, our prayers for Iraq's peace and stable security will be met."
The fighting in and around Najaf has killed scores of civilians since it began Aug. 5. In the last 24 hours, 95 people were killed during clashes in Najaf and Kufa, according to the Iraqi Health Ministry.
Al-Sistani has called for all sides to declare Najaf and Kufa weapons-free cities, for all foreign forces to withdraw from Najaf and leave security to the police, and for the Iraqi government to compensate those harmed by the fighting in those cities.