The assassination of Mohammed Baqr al-Hakim in Najaf comes in the midst of a bitter struggle for power among the Iraqi Shia.
The attack took place shortly after Friday prayers
Yet many analysts - and many Shia -believe it likely the attackers came from outside the community.
Suspicion has inevitably fallen on elements loyal to the old Saddam Hussein regime, which regarded the Shia with suspicion and brutally suppressed them.
But it is also possible that a tactical alliance is emerging between Saddam Hussein loyalists and Islamic militants who have entered Iraq over the last few months.
Since the fall of the Saddam Hussein regime, the Shia have been split over whether to co-operate with the US-led administration.
The leading ayatollahs are critical of the Americans but ready to co-operate with them.
Hakim had just accused Saddam loyalists of targeting Shia leaders
This is the view of two of the main Shia groups - the Daawa Party and Ayatollah Hakim's group, the Supreme Council for the Islamic Revolution in Iraq (Sciri).
This approach has been strongly criticised by a group led by a radical young Shia figure, Muqtada al-Sadr.
He has been blamed for earlier attacks on Shia clerics, though staunchly denying involvement in any of them.
On Sunday, there was a bomb attack in Najaf which targeted Ayatollah Hakim's uncle, also a respected ayatollah. He escaped with only scratches but three of his bodyguards were killed.
In April, as the Saddam Hussein regime was collapsing in Baghdad, an angry crowd in Najaf attacked and killed Abdel-Majid al-Khoei, a young cleric who had returned home from exile in London and was working with the Americans.
But the simmering tensions and rivalries within the Shia community may provide the context, rather than the direct cause, of Ayatollah Hakim's assassination.
To attack a popular figure after Friday prayers, moreover at one of the most revered Shia shrines, is deeply repugnant to most Shia.
The shrine of Imam al-Ali is one of the holiest sites for Shia Muslims
Speculation is therefore turning to the same groups as those suspected of carrying out last week's devastating truck bomb attack against the UN headquarters in Baghdad.
The bombers may be Iraqi nationalists or non-Iraqi Sunni Islamists, or even an unholy alliance of the two.
For either group, killing a prominent Shia figure would strike a double blow.
It would be a settling of scores against the Shia, to whom both groups are hostile. And it would hurt the American occupiers by further destabilising the country.
For the Americans, the Shia, comprising some 60% of the Iraqi population, are crucial to the success of their task.
If security is to be established, it is vital for the Americans (and their British and other allies) that the mainly Shia south remain free of serious violence - as, on the whole, it has been since the fall of Saddam Hussein.
Equally important, the Shia, as the biggest community, must be successfully integrated into the country's new political structure.
The assassination may well complicate both tasks.