A top Iraqi Shia cleric has written to the US president and UK prime minister questioning their sincerity over the transfer of power to the Iraqis.
News of the letter followed a day of protests in Basra
Hojat Al-Islam Ali Abdulhakim Alsafi said the transition plan had more to do with US elections than Iraqi interests.
News of his letter emerged as tens of thousands of Iraqis demonstrated in the southern, mainly Shia city of Basra.
The top US official in Iraq is due to discuss the crisis with President George W Bush in Washington on Friday.
Protesters are calling for the country's new authorities to be chosen in direct elections, not selected indirectly as the US proposes.
The US civil administrator in Iraq, Paul Bremer, will also have talks with UN Secretary General Kofi Annan on Monday to try to persuade him to involve the UN in the process.
The BBC's Justin Webb in Washington says the Bush administration is finding itself needing to negotiate and compromise in an effort to kick-start the new Iraq.
Opposition to the US plan has been spearheaded by Iraq's leading Shia cleric, Grand Ayatollah Ali al-Sistani.
Mr Alsafi, who is the second most senior Shia cleric in Iraq, warned President Bush and UK Prime Minister Tony Blair in his letter that they would drag their countries into a battle they would lose if they did not let Iraqis choose their own institutions.
POWER TRANSFER TIMELINE
Feb 2004: Fundamental Law (provisional constitution) to be introduced
May, 2004: Selection of Transitional National Assembly (TNA)
June 2004: TNA to take power; Coalition Authority and Governing Council to dissolve
March 2005: Constitutional Convention elected to draft new constitution
Dec 2005: New constitution; elections and appointment of new government
He said the coalition argument about logistical difficulties involved in organising elections was simply a pretext to deny Iraqis their legitimate aspirations.
Denying the Iraqis the right to choose their own representatives would marginalise the vast, Shia majority, he added.
The coalition says early elections are not feasible, and proposes an appointed government broadly representing Iraq's diverse religious and ethnic groups.
The head of the Iraqi Governing Council, Adnan Pachachi, has warned that the American-led occupation could go on for another two years if there is no agreement on how to choose a new government.
The Basra demonstrations were peaceful, but the BBC's Dumeetha Luthra says they were a display of latent power.
They sent a clear message to the Americans, she says: We can mobilise the people against you if we need to.
Speaker after speaker called for the rejection of the US plans and demonstrators chanted and sang in support of their leaders.
The US State Department said it considered the demonstrations to be "fundamentally, a good thing", adding that it took the people's feelings seriously.
The Shia were oppressed under Saddam Hussein and had been expected to be strong supporters of the US-led coalition which overthrew the old regime.
But correspondents say problems arose after an agreement in November between the interim Iraqi Governing Council and US administrator Paul Bremer that a new Iraqi assembly to take power by the middle of the year would be selected, not elected.