The Shia militants have been holding Najaf's sprawling cemetery
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Radical Shia cleric Moqtada Sadr has issued conditional support for the interim Iraqi government, which he earlier rejected as a US puppet.
In a sermon at Friday prayers in the town of Kufa, he also urged his supporters to stop attacking Iraqi security forces.
Mr Sadr, a firebrand whose militia has fought US forces since March, also called for an end to conflict.
But his supporters clashed with members of a pro-US faction in nearby Najaf.
Stones and shoes were thrown in the clash at the shrine of Imam Ali leaving several people injured and forcing the cancellation of Friday prayers.
In a sermon read out by his spokesman, Mr Sadr called upon the interim government to work to end the occupation according to a timetable set by Iraqi officials, reported a correspondent for Voice of Mujahidin radio present at the sermon.
Mr Sadr added that the formation of the government was a good opportunity to bury past differences and "forge ahead toward the building of a unified Iraq".
The sermon in general was conciliatory, the BBC's David Bamford says.
He says Mr Sadr called on the military Mehdi Army supporters to honour the truce agreed in Najaf on 4 June - to stop attacks on Iraqi security forces who have now taken over the role of security in the city from US troops who have withdrawn.
There has not been any official reaction to Mr Sadr's speech in Kufa, where he delivers fiery Friday sermons at the main mosque every week.
The US-led coalition accuses him of killing Abdul Majid al-Khoei, a moderate Shia leader shortly after the fall of Saddam Hussein's regime.
Najaf battles
Hopes of bringing an end to the conflict with Mr Sadr's faction were not improved on Friday, when scuffles forced the closure of the Imam Ali shrine in Najaf for the first time during weekly congregational prayers since the US-led invasion in 2003.
On Wednesday night and Thursday Mr Sadr's followers had clashed with Iraqi police in Najaf - less than a week after police began patrols under a truce between the militia and US troops.
At least six people were killed in the fighting, including police officers, militants and two civilians. Another 29 people were injured, including children.
On Friday morning hundreds of supporters of the Supreme Council for Islamic Revolution in Iraq (Sciri) marched towards the Imam Ali Shrine to express support for the truce.
Sadr supporters blocked their way, and fistfights broke out and missiles were thrown.
One top Sciri official was reportedly wounded in the head during the confrontation.
The area surrounding the sacred compound is still controlled by Sadr militiamen despite the week-old truce under which they have withdrawn from the rest of the city.