Iran has declared three days of official mourning for Ayatollah Mohammed Baqr al-Hakim, who had made his home in Tehran for more than two decades.
Ayatollah Hakim had close links with Iran's Supreme Leader
The ayatollah enjoyed close relations with Iranian power circles, although that did not prevent his movement from negotiating with the Americans and taking part in the new US-backed administration in Baghdad.
Iranian officials have said that the ultimate responsibility for the instability lies with the occupation.
Iran had invested heavily in Ayatollah Hakim and his Supreme Council; it is clearly feeling his loss as a major blow.
As an exile who had made his home in Teheran since 1980 he had a highly unusual position and status here.
No other foreign group was allowed to run what amounted to a well-equipped private army on Iranian soil.
The Supreme Council's Badr Brigade was even allowed to mount military parades to show off their tanks and heavy guns.
That unique status was reflected in the equally unusual decision to honour the late ayatollah with three days of national mourning.
Iran is shaken by Hakim's death
His most important relationship was with the office of the Iranian Supreme Leader, Ayatollah Ali Khamenei.
Ayatollah Khamenei issued a statement saying the incident was further proof of the insecurity and instability spread by Iraq's occupiers.
The Iranian Government also issued a statement condemning the outrage and laying the blame firmly on the occupation forces.
It said they were responsible under international law for maintaining security in the country.
There is little doubt that Iranian leaders are sincerely shaken by the death of the ayatollah and his entourage.
Although they are highly critical of the American-led occupation of Iraq, they insist that their main concern and interest is to see the country emerge as a stable and non-threatening neighbour - a prospect that may have suffered a severe setback.