The political movement loyal to radical Shia cleric Moqtada Sadr has withdrawn from Iraq's governing Shia alliance.
Moqtada Sadr's move is not surprising, analysts say
The move deprives Prime Minister Nouri Maliki's coalition of 30 votes - leaving it in control of about half the seats in parliament.
The decision, announced at a news conference in the holy city of Najaf, comes five months after Mr Sadr pulled out his ministers from the cabinet.
The group has complained that Mr Maliki has not consulted them over decisions.
Other grievances voiced in the past by the Sadr bloc include their call - ignored by the prime minister - for a timetable for the withdrawal of US-led forces from Iraq.
In August, the main Sunni alliance also withdrew from the Iraqi cabinet, which currently has 17 ministers - with 23 other portfolios left unfilled.
'Demands not met'
Nouri Maliki became prime minister largely because of Mr Sadr's support, so the latest move is a significant development, but not necessarily a crisis, says the BBC's Hugh Sykes, in Baghdad.
Maliki has said national reconciliation is Iraq's only choice
Despite being in a precarious position, Mr Maliki should be able to stay in power with support from other groups.
While there has been no official explanation of the timing of the announcement, our correspondent says Mr Sadr may be worried about continuing to support a government that is so close to the Americans.
Mr Sadr supporters have also been unhappy with Mr Maliki's moves to allow former members of Saddam Hussein's regime back into the administration, our correspondent says.
In a statement made in Najaf, the Sadr group said: "The political committee has declared the withdrawal of the Sadr bloc from the alliance because there was no visible indication that the demands of Sadr's bloc were being met."
It gave no further details.
The governing United Iraqi Alliance has already lost another small Shia bloc, the Fadhila party, but Mr Maliki still has the support of his own small Islamic Dawa party and the other substantial Shia bloc, the Supreme Iraq Islamic Council, led by Abdul Aziz al-Hakim.
The Sadr block withdrawal leaves the prime minister with support from 136 MPs, including those from two Kurdish parties.
Many observers will be keen to see whether the suspension of the activities of the Mehdi Army militia that Moqtada Sadr ordered at the end of August will hold.
Analysts see the move as an attempt by Mr Sadr to regain control over his increasingly divided militia.
Meanwhile, in a report sent to the US Congress on Friday, the White House blamed the Iraqi government for failing to pass laws to reconcile Shia and Sunni Arabs.
In other developments:
- at least 10 people are killed in a bomb attack near a market in Baghdad's Amil district
- the purported head of al-Qaeda in Iraq offers a $100,000 (£49,310) reward for the murder of a Swedish cartoonist over his drawing depicting the Prophet Muhammad
- in northern Iraq, a Sunni Arab tribal leader says local groups have created a new alliance to fight al-Qaeda