Witnesses said a US aircraft dropped at least one bomb on the one-storey office around 2:00am on Monday (22:00 GMT on Sunday) and virtually destroyed it.

There was no immediate comment from the US military, which reported 19 members of al-Sadr's Mahdi Army were killed in a series of clashes in the impoverished Shia neighbourhood on Sunday.

US forces had raided an office in the early hours of Sunday and arrested two people, one of them said to be a Mahdi Army financier, US military spokesmen said.

The raid was part of a stepped up military campaign against an uprising launched by al-Sadr against US-led occupation forces a month ago. 

Meanwhile, a member of the Supreme Council for Islamic Revolution in Iraq (SCIRI), Shaikh Sadr al-Din al-Qubanchi has announced that al-Sadr's Mahdi Army will withdraw from Najaf this week in an attempt to ease the tension prevailing in the city.

Speaking to a press conference in Najaf, al-Qubanchi called upon the residents themselves to take control of the city.

Al-Qubanchi has guaranteed occupation forces and tanks will not enter the city, upon an agreement approved by the four main religious authorities in Najaf.

And in al-Nasiriya, the director of al-Sadr's office said that the al-Mahdi Army withdrew from the city on Sunday night.

Foreigners killed

The action comes after Italian forces released a member of al-Sadr's office, Shaikh Muayyad al-Asadi, Aljazeera's correspondent in al-Nasiriya reported, quoting sources from al-Sadr's office in the city.

Italian troops detained al-Asadi a few days ago after raiding his home, the correspondent added.

Earlier on Monday, a South African and an Iraqi were killed and a New Zealander seriously wounded in the northern Iraqi city of Kirkuk, a police official said.

Gunmen opened fire with AK-47 rifles in a drive-by shooting on the victims' vehicle as they were leaving their residence in oil-rich Kirkuk, 250km north of Baghdad.

The foreigners were engineers and the Iraqi was their driver, the official said. He did not elaborate.

Resistance fighters have been waging a violent campaign of bombings and shootings against US-led troops, Iraqi police, security forces and civilians since former Iraqi leader Saddam Hussein was toppled last April.