A spokesman for al-Sadr said on Saturday negotiations were at a dead end. A US spokesman denied any direct talks had taken place although, he said, Iraq's US-led administration was keen to avoid bloodshed in Najaf.
Caught in the face-off between US troops and al-Sadr's Mahdi army militia, Najaf residents complained their lives and livelihoods were at risk with shops closed and streets around the city's shrines crowded with gunmen instead of pilgrims.
Al-Sadr's supporters say Iraq's top Shia clerics back the uprising they staged this month against the US-led occupiers.
"We know that any assault from the Americans on the holy city of Najaf will be the zero hour for the revolution all over Iraq," said al-Sadr's spokesman, Qays al-Khazali. "The religious authority has a clear stand in providing us with moral support."
But representatives of Najaf's four grand Ayat Allahs have distanced themselves from the cleric's actions.
"Muqtada did not consult the religious authority when he started this crisis or when he created the Mahdi army," said a spokesman for Grand Ayat Allah Ishaq al-Fayadh.
Al-Sadr says a Najaf attack will be
'zero hour for Iraq revolution'
US officials say al-Sadr, wanted in connection with the murder of another Shia cleric a year ago, must face justice in an Iraqi court and disarm his "ragtag militia".
Much of the Mahdi army is made up of young unemployed men from Baghdad's slums or the deprived regions of southern Iraq. Many Najaf residents regard their presence with alarm.
Some Shia fear unless a peaceful solution can be found, al-Sadr's uprising will lead not just to more fighting with occupying troops, but also to internecine Shia conflict.
"If things are not solved peacefully it could lead to an internal explosion," said Adnan al-Asaadi, a senior figure in the Shia Dawa party.