The US-led coalition in Iraq says an arrest warrant has been issued for radical cleric Moqtada Sadr.
Police joined the militants' protest in Basra
A coalition spokesman told a news conference in Baghdad that the warrant had been issued in connection with the murder of a rival cleric last year.
The statement came on the second day of violent anti-coalition protests across Iraq by Mr Sadr's supporters.
US helicopter gunships targeted militia members loyal to Mr Sadr in the mainly Shia district of al-Shuala in Baghdad.
Coalition officials told a news conference in Baghdad that the warrant for Mr Sadr's arrest had been drawn up by an Iraqi judge and would be executed "without advance warning".
Mr Sadr has denied any involvement in the killing of Abdel-Majid al-Khoei in Najaf in April last year.
The Shia protests were triggered by the closure of Mr Sadr's al-Hawza newspaper a week ago on the grounds that it was inciting violence.
They intensified after the arrest on Saturday of one of Mr Sadr's top aides, Mustafa Yacoubi, in connection with Mr Khoei's murder.
The coalition accuses Mr Sadr of trying to usurp its power and says the revolt will not be tolerated.
Many of Iraq's majority Shia Muslims, repressed under Saddam Hussein, welcomed last year's US-led invasion, and attacks on coalition forces were largely confined to the minority Sunni community before Sunday's violence.
However, Mr Sadr has become an increasingly outspoken opponent of the occupation.
The US administrator in Iraq, Paul Bremer, said on Monday that Mr Sadr's followers had effectively placed themselves outside the law.
But Mr Sadr responded by saying he was "proud" to be considered an outlaw by the US.
The cleric, who is being protected by armed supporters at a mosque in the city of Kufa, was quoted by Reuters news agency as saying: "If that means breaking the law of the American tyranny... I'm proud of that and that is why I'm in revolt."
The latest upsurge in violence has fuelled speculation that the handover might be delayed.
But in Washington, President George W Bush said the US was committed to handing over sovereignty to Iraqis on 30 June.
Apache gunships targeted militiamen of Mr Sadr's Mehdi Army on the streets of the capital's mainly Shia district of al-Shuala as a battle raged on the ground, correspondents report.
One US vehicle was reported to be in flames, but there were no immediate reports of casualties.
At least nine coalition soldiers and 46 Iraqis have been killed in confrontations related to the protests.
Local resident Abbas Amid told the AFP news agency that fighting had flared after a US troop convoy tried to enter Shuala and came under heavy fire.
There was also tension in Sadr City, a district which saw eight US troops and a reported 22 Iraqis killed in Sunday's fighting.
American tanks were blocking approaches to the area and soldiers were carrying out vehicle searches as angry protesters gathered again.
US troops also began an offensive in Falluja, a Sunni town where four Americans were killed and mutilated.
In the southern city of Basra, about 150 Mehdi Army members occupied the governor's office at dawn on Monday as part of the protests, but in the evening they ended their action.
At one stage British forces moved towards the governor's office and gunfire was heard, but the soldiers then withdrew.
Four Shia Iraqis were killed in clashes with UK forces in the south-eastern city of Amara on Sunday, while a protest which turned violent near the holy city of Najaf left a coalition soldier from El Salvador dead, along with about 20 Iraqis.
Paul Bremer accused Mr Sadr of seeking to "establish his authority in the place of the legitimate authority".
"We have a group under Moqtada al-Sadr that has basically placed itself outside the legal authorities, the coalition and Iraqi officials," he said in Baghdad.
Grand Ayatollah Ali al-Sistani, Iraq's leading Shia cleric, appealed for calm and negotiations on Sunday, as a call to "terrorise the enemy" circulated among Moqtada al-Sadr's followers.