The faction loyal to Shia cleric Moqtada Sadr has reacted angrily to the rejection by Iraq's presidency council of a draft law on regional powers.
Sadr has the backing of 32 members in a 275 seat parliament
A spokesman for the bloc, Nassar Rubaie, denounced the council's decision as a form of dictatorship.
He said his group was considering calling for sit-ins and a general strike in protest.
The presidency council has not said which of its three members objected to the law.
However, Sadrist politicians have blamed the decision on one of the vice-presidents, Adel Abdulmahdi, who is a senior figure in a rival Shia party, the Supreme Islamic Iraqi Council.
The draft law would have paved the way for provincial elections. Its rejection is being seen as setback in the process of reconciling Iraqi factions.
The law, which also defines the relationship between Baghdad and local authorities, was one of 18 benchmarks set by Washington as targets in the process of political reconciliation.
The legislation will now be sent back to parliament, which passed it as part of a package of three controversial laws, earlier this month after weeks of delays.
The Iraqi presidential council is made up of President Jalal Talabani - a Kurd - and Shia and Sunni vice-presidents, Mr Abdulmahdi and Tariq al-Hashemi.
The three leaders on Wednesday backed the other two laws in the package - the 2008 budget and an amnesty law for detainees.
Correspondents say that as the Kurds had wanted the budget to be passed, the Sunni Arabs wanted the amnesty law, and the Shia Muslims were keen to press ahead with provincial elections, passing the laws together had pleased all three groups.