But despite the Shia Muslim leader's latest moves to cease his militia's armed opposition to US-led occupation forces, his bid to integrate into the political mainstream remains uncertain.
"The mission of US forces is to kill or capture Muqtada al-Sadr," said Lieutenant General Ricardo Sanchez, the US commander in Iraq on 12 April after the Mahdi Army took control of three southern mainly Shia cities and confronted foreign occupation troops.
Al-Sadr had at the time vowed to turn Iraq into another Vietnam for the US.
But in a move welcomed by Sanchez's deputy, al-Sadr's militia on Friday announced a unilateral ceasefire with US forces in the Baghdad district of Sadr City.
"Any time we are resolving differences peacefully rather than through use of arms, that's a success,” Brigadier General Mark Kimmitt told Aljazeera.net.
Mahdi Army stand-down?
The Mahdi Army offered to help police and military forces secure the "safety of institutions, Iraqi state buildings and government buildings" as well as guard public utilities and oil infrastructure from "terrorists and saboteurs".
But the senior spokesman for al-Sadr in Baghdad, Abbas al-Rubaii, told Aljazeera.net the ceasefire was designed to avoid confusion between legitimate resistance and other kinds of attacks, such as those on civilian infrastructure.
Many Iraqi youth rallied to
al-Sadr's call to form the militia
"It does not mean we accept the occupation," insisted Rubaii.
Al-Sadr's followers rose up in April after the US closed down his newspaper and then moved to arrest him for the alleged murder of a rival Shia leader last year.
He initiated a shaky ceasefire last month in the southern holy city of Najaf and the surrounding region. A truce with US-led forces followed on 4 June but recent days have seen sporadic clashes.
Pressed into politics
Iraqi political analysts says al-Sadr has been responding to different pressures as he moves from military to political engagement, demonstrating both a degree of weakness and strength.
Senior religious figures within the Shia community have pressed al-Sadr, insisting that holy cities such as Najaf cannot belong just to his followers, and that his confrontations may jeopardise Shia interests in Iraq.
The impending transfer of civic authority to a transitional Iraqi government has forced his hand, says Baghdad University's Abd al-Jabbar Ahmad Abd Allah, a professor specialising in issues related to national unity and democracy in developing countries.
"His decision to distinguish between resistance and terrorism is politically strategic," Abd Allah told Aljazeera.net.
"Until now, [the Mahdi Army] has been attacking the tanks of the United States. But from 1 July, Iraqi officers will be there on the street and if he attacks them, such actions will be presented as terrorism.|
"He also thinks that he has many followers not just to fight but [to vote] in municipal and national elections, and in this way he can make political gains."
Dr Jabar Habib Jabar, a political scientist at Baghdad University, agrees that al-Sadr is reacting to critical events, stressing that al-Sadr has gone about as far as he can militarily.
"Your agenda can't be just to oppose the occupation and be anti-American," Jabar told Aljazeera.net. "You have to present your political demands and social programmes."
Al-Sadr's position was weakened, moreover, after his Mahdi Army suffered heavy casualties fighting far-better armed US-led forces in Karbala and Najaf in April and May.
Jabar says al-Sadr's opposition
made him a symbol of resistance
The interim administration's willingness to engage with al-Sadr, however, stems from the awareness that the rebellious 30-year-old Shia leader is popular.
"His support comes more from the young - the more rebellious and emotional part of society.
"It comes from students, the unemployed youth, especially in the [mainly Shia] south," says Abd Allah, adding that older Shia see the more senior religious leader Ayat Allah Ali al-Sistani as a wiser, more respectable figure.
Al-Sadr's armed defiance of the US-led occupation also helped transform him into a figure associated with national resistance, says Jabar.
And fundamentally, al-Sadr's popularity stems from the stature of his late father, who was a revered Ayat Allah.
With this in mind, the government hopes to demonstrate and strengthen its own credibility if it can persuade al-Sadr to engage with it.
Al-Sadr was invited a week ago to join a national conference, which will select a council to advise the interim government. But he has rejected the invitation, saying the one seat on offer failed to recognise his political weight.
Jabar says this shows al-Sadr is unlikely to join this body and will focus on preparing for the elections scheduled for January 2005.
Although Al-Sadr has yet to reveal his political agenda, he is expected to promote a theocratic approach and has been linked by the US to the Shia in neighbouring Iran.
The holy city of Najaf witnessed
intense fighting in May
Avoiding outlining specific policies, al-Rubaii describes al-Sadr's fledgling party as a reformist religious movement committed to social justice, adding that the government should take the country's Islamic identity into account while upholding ethnic and religious rights in a federal state.
But if al-Sadr pushes for an Islamic republic that reminds the US too much of Iran, he may find his political participation, let alone any meaningful gains, severely limited by US pressure.
That prospect, however, carries the threat of future instability. Al-Rubaii says that if the proposed future multinational security force in Iraq is "a US occupying force by another name" or if the interim government curbs basic freedoms, "we will return to arms".
One issue still looming for al-Sadr's is the outstanding arrest warrant issued by an Iraqi judge in connection with the murder of the Shia leader Abd al-Majid al-Khoei in April 2003.
It was believed the US favoured al-Khoei's influence among the Shia.
Al-Sadr has denied any role in the murder.
Nevertheless, al-Sadr still needs to face justice, Kimmit told Aljazeera.net.
"He will be handed an indictment for his participation in the murder of Ayat Allah al-Khoei. The people of Iraq must see him brought to justice," he said.
However, the US has recently described the case as "an internal Iraqi matter".
Al-Rubaii questions the legality of the existing warrant, but says that if an independent Iraqi investigation requires al-Sadr to face an Iraqi judge, "we shall respect the law". Analysts say that such cooperation is essential.
However, some analysts believe it may be an impossible scenario to follow through with arresting al-Sadr.
"There is no individual or government in Iraq that can arrest al-Sadr," says Abd Allah, offering two reasons why this is the case.
Brigadier General Mark Kimmitt:
Al-Sadr still needs to face justice
Firstly, members of the interim administration want to avoid jeopardising their own support before elections.
And secondly, there is a practical wish to encourage stability.
Jabar notes al-Sadr's involvement in al-Khoei's murder has not been proved and suggests it is unlikely.
But he agrees that if required, pragmatism is likely to prevail leading to some kind of deal.
"They can't forget about the court case but, yes, I think they are heading towards this kind of solution."