Sunni religious leaders issued the warning on Sunday.
Using militiamen to help restore security to Iraq would be "to ignore a large section of Muslims and push them into the ranks of the opposition," said a statement issued by the Committee of Muslim Ulama in Iraq.
It would be "an attempt to break up Iraq," the statement said, recalling the Lebanese civil war between 1975 and 1990 when rival militias battled for control.
The committee, set up after Hussein’s overthrow in April, represents the Sunni minority in the country which had held power over the Shia majority.
“From a religious point of view it is unacceptable," said the committee, following reports that "US forces intend to set up militias based on several parties termed Shia and Kurds”.
“This is a way to divide and rule by exploiting confessionalism and racism," said the ulamas.
Divide and rule
The Washington Post reported on Wednesday that the new militia force would be composed of 750 to 850 fighters and initially work mainly around the capital.
The Post cited Iraqi officials as saying that the new force was a "done deal" although later the same day coalition spokesman Dan Senor insisted discussions were still going on with the interim leadership, suggesting militia elements would form a special counter-insurgency group within the civil defence corps.
“A new Iraqi army must be created with its own people so that it can ensure security in all Iraq while representing all the diversity of denominations and races," said the Sunni statement.
“Elections should not take place until this army is created which, if necessary, could be backed by an Arab force. Then a government could be formed with the handover of sovereignty."