British troops remain on standby to help out Iraqi forces in Amara after an outbreak of serious violence.
The violence has left dozens of people injured
The Army said the southern city was "calm but tense" after hundreds of extra Iraqi troops were sent there.
Clashes between police and up to 300 gunmen on Thursday and Friday left at least 30 people dead and 100 injured.
The UK handed power to Iraqi forces in Amara in August. The country's foreign ministry is now calling for a rethink of the police of transferring power.
Iraqi Foreign Minister Hoshyar Zebari said British, Iraqi and multi-national commanders needed to "evaluate the situation" to decide if security in the area could be handed back.
The MoD pulled all UK troops out of Amara, in Maysan province, because the security situation was considered "relatively quiet".
Iraqi forces took over and British troops were given other responsibilities in the surrounding area.
But about 700 extra Iraqi troops were sent to Amara on Friday after militias began to attack police stations.
A 500-strong battle group of British soldiers was put on standby.
A curfew was put into force and by Saturday Iraqi forces appeared to have brought the situation under control.
Major Charlie Burbridge, based in nearby Basra, told AFP news agency the situation was "definitely calm, but it's very tense".
He added: "We suspect that there is a capacity for it to brew up again without any warning."
It is thought the violence was sparked on Thursday morning by the arrest of the brother of the local leader of the Mehdi militia, loyal to the radical Shia cleric Moqtada Sadr.
Gunmen attacked a number of police stations in Amara - the administrative centre of Maysan with a population of about 300,000.
A high-level delegation was sent to the city by Iraqi Prime Minister Nouri Maliki and Interior Minister Jawad al-Bolani met Mr Sadr.
Mr Bolani said the situation in Amara was now "good and under control".
The UK military has been making moves to hand over power to Iraqi forces in Maysan, following transfers of power in Dhi Qar and Muthanna provinces earlier this year.
Basra and Maysan are the only two provinces still under British control.