Aides to top Shia cleric Ayatollah Ali Sistani have opened talks with rebel preacher Moqtada Sadr in Najaf in a bid to end the three-week stand-off there.
It was unclear who carried out the Kufa attacks
But the peace initiative was overshadowed by violence, as attacks in nearby Kufa left a reported 74 dead.
Mortar shells hit the Kufa mosque and there were also exchanges of gunfire.
The health ministry said about 315 people were wounded in the violence, which continued as thousands of Shias marched towards Najaf.
Ayatollah Sistani had called on Shias to march on Najaf after his return to Iraq on Wednesday following medical treatment in the UK.
A 24-hour ceasefire was declared in Najaf to coincide with the ayatollah's visit, though the local governor warned hostilities would resume if no solution was found.
US denies involvement
It was unclear who carried out the attacks in Kufa.
There is also some confusion over the number of attacks and the death tolls in each.
At least 25 were killed in the mortar attacks on the Kufa mosque, where many people believed to be supporters of radical cleric Moqtada Sadr had gathered to march to Najaf.
Later, more fatalities occurred near Kufa as gunmen hidden among Shia marchers apparently fired shots at Iraqi police, who fired back.
The Reuters agency reported a similar fatal exchange of gunfire involving supporters of Ayatollah Sistani in Najaf itself.
US-led forces said they had not carried out any operations in Kufa for 24 hours and the interim government said it had called a ceasefire in Najaf.
The US military then said in a statement that it had suspended offensive operations "at the request of the local and national Iraqi government".
Television pictures showed dozens of wounded men lying on the ground amid pools of blood or being ferried to Kufa's hospital.
Crowds of angry people were reported to have built up around the gates of the hospital where casualties were taken.
"We were gathering outside and inside the mosque preparing to head to Najaf when two mortar shells landed, one inside the mosque and the other on the main gate," said one man who was taking an injured friend to the
"This is a criminal act. We just wanted to launch a peaceful demonstration," Hani Hashem said.
The governor of Najaf said neither US nor Iraqi government forces had carried out the attack.
The interim government declared a 24-hour ceasefire in Najaf, saying it hoped a deal could be reached.
Najaf had fallen quiet by the time the Shia spiritual leader arrived in the city, where fighters loyal to Mr Sadr are holed up in one of Shia Islam's holiest shrines.
Ayatollah Sistani arrived at the head of a huge convoy of supporters.
He is expected to unveil an initiative to end the three-week crisis, during which the old city has been repeatedly bombarded by US-led forces.
Aides said the proposals included weapons-free zones in both Najaf and Kufa - a stronghold of Mr Sadr - and the replacement of foreign troops by Iraqi police.
"I have come for the sake of Najaf and I will stay in Najaf until the crisis ends," Ayatollah Sistani said on Wednesday after his return to Iraq from weeks of medical treatment in the UK.
He was instrumental in brokering an earlier ceasefire between Mr Sadr's fighters and US-led forces in the city.