In an apparent bid to marginalise the Shia Muslim leader Muqtada al-Sadr on Thursday, Washington's de facto viceroy, Paul Bremer, named Adnan al-Dhurfi as the provincial governor and called on al-Sadr's militia to lay down its arms.
Also appointing a new governor in Baghdad, Bremer denounced al-Sadr as an outlaw who used holy Shia sites in the region to launch a rebellion.
His denunciation followed the reported deaths of 41 members of al-Sadr's Mahdi Army in an ambush east of Najaf.
Al-Sadr's supporters have seized at least partial control of several Shia-dominated towns and cities in southern Iraq and defied US forces for the past month.
Plumes of smoke rose from a cemetery on the fringes of the city as US helicopter gunships swooped low over the area.
To date, Washington has avoided a Falluja-like siege on Najaf. The city contains some of Shia Islam's holiest sites and the US has been cautious not to inflame Muslim feelings with a city-wide assault.
Dozens of al-Sadr's militia have
been killed fighting US troops
US commanders have said they will avoid entering any shrines.
But US-led occupation forces are keen to crush al-Sadr's resistance before a scheduled 30 June handover of limited sovereignty.
Occupation forces also recaptured the governor's office in the city, a senior occupation official said. "We have rescued the governor's building and we intend to have the governor reoccupy it."
But locals said there had been no resistance fighting in or around the building.
Elsewhere in the south, US tanks entered the holy Shia city of Karbala and took up positions close to the main shrines after destroying al-Sadr's offices.
Hospital officials said one Mahdi Army militiaman had been killed and nine people were wounded in the fighting, most of them civilians.
Italian troops also clashed with al-Sadr's militiamen, engaging in a short gunbattle south of Nasiriya, Italian officials said.
Earlier, in the capital Baghdad, a human bomber killed five Iraqis and a US soldier outside the main occupation headquarters.