Qais al-Khazaali, the spokesman, said al-Sadr had met with the Shia House, a grouping of Shia parties and religious authorities.
"Starting tomorrow [Friday] we shall start or continue withdrawing any armed presence and freeing all suspects" arrested by al-Sadr's militia, he said at a joint news conference with Shia representative Haidar al-Sufi.
The Shia House would "choose some of its members to supervise" application of a truce with US forces in specific districts, al-Sufi said.
"We ask the governor of Najaf to deploy the police forces made up of citizens of Najaf to bring security to the people," al-Sufi added. "We ask the occupation forces and the Iraqi police to refrain from making arrests and searches in Najaf province."
Also on Thurday, five civilians and an unknown number of Shia Muslim militiamen were killed in Kufa in clashes with US troops as fresh fighting rocked neighbouring Najaf, said the US military and medics.
The US military said the clashes broke out in Kufa as troops searched a school suspected of having been used by Mahdi Army members to launch mortar attacks.
Hundreds of militia fighters and civilians have been killed across central and southern Iraq since al-Sadr began his armed opposition to US-led occupation troops two months ago.
A truce was announced in Najaf and Kerbala provinces on May 27 between the coalition forces and Sadr's Mahdi Army militia, but it has frequently been broken.
Under the deal, US troops were to halt patrols and withdraw to five bases in Najaf.
Al-Sadr began his uprising in early April after US overseer Paul Bremer suspended one of his newspapers on charges of inciting violence and US troops arrested one of his key aides.
A warrant was issued for his arrest in connection with the murder of a pro-US cleric last April.
Al-Sadr has offered to pull all militiamen who are not from Najaf out of the shrine city provided US troops leave as well.
He has also asked for legal proceedings against him to be suspended until there is an elected Iraqi government, but coalition officials continue to insist that he disband his private army and face justice.