Thousands of protesters in the southern city of Nasiriya called for the fall of interim Prime Minister Iyad Allawi and set fire to the local office of his political party on Wednesday.
The demonstrators, enraged by military action against Iraqi Shia Muslim fighters in Najaf, screamed, "Down, down Allawi" and "Allawi, you coward, you American agent".
They held up posters of Muqtada al-Sadr, the Shia Muslim leader whose fighters have been challenging US and Iraqi forces in Najaf for seven straight days.
Nasiriya is one of the seven cities where the Shia uprising has erupted in the past week - the biggest challenge to Allawi's interim government since it took over from the US occupation authority in late June.
The bloodiest fighting is taking place in Najaf, where US helicopter gunships and warplanes have pounded al-Sadr's Al-Mahdi army positions.
Any harm to holy sites in the city would enrage millions of Shia and Sunni Muslims in Iraq, Arab and Muslim countries.
Workers at an oil-pumping station in southern Iraq said on Wednesday they have stopped operations in protest against the government's backing of the US offensive against followers of al-Sadr.
The station in the southern Arab Shia town of Nasiriya cut supplies of refined products and liquefied natural gas to Baghdad, a statement by the workers said.
"Political dialogue is the only way to put Iraq back on the right track and obtain the departure of foreign troops"
Arab League secretary-general
"We stopped pumping in protest of the inhuman conduct of the interim government and its cooperation with the occupation forces to ransack the holy city of Najaf and insult the Shia, their symbols and holy places," the statement said.
Iraqi oil officials declined to comment. Clashes between US forces and the Al-Mahdi army since last week have disrupted fuel and other supplies to Baghdad as roads became more hazardous and petrol stations were looted.
The US military said on Wednesday it was preparing a final assault on al-Sadr's militia in Najaf, after the cleric urged his men to keep fighting even if he was killed.
"Marines, US army soldiers and Iraqi National Guardsmen continue joint training exercises in preparation for major assaults against enemy forces in the city of Najaf," the 11th Marine Expeditionary Unit (MEU) said on Wednesday.
US marines, Iraqi National Guardsmen, two reinforced US infantry battalions, and a US aviation battalion are "currently working together to constitute the force that will conduct these major assaults", a statement said.
US gunships strafing Al-Mahdi
army positions in Najaf
"MEU training with the ING (Iraqi National Guard) began several days ago, and will foster an efficient, effective, cohesive team as ING leads the fight in ridding their city of those who break the rules of law and order," it added.
"Iraqi and US forces are making final preparations as we get ready to finish this fight that the Muqtada militia started," said marine commander in Najaf Col Anthony Haslam.
Calls for dialogue
Following the US announcement, Arab League Secretary-General Amr Musa called for dialogue in Iraq.
"Political dialogue is the only way to put Iraq back on the right track and obtain the departure of foreign troops," his spokesman Husam Zaki quoted him as saying.
"Building a new Iraq requires from all sides the logic of dialogue and not that of military might," Musa said, voicing hope that the Arab League could play a part in "achieving national reconciliation through a national assembly grouping all the sons of Iraq".
Speaking to Aljazeera, Iraq's vice president, Ibrahim al-Jaafari, has urged US forces to leave Najaf to end the fighting.
"I call for multinational forces to leave Najaf and for only Iraqi forces to remain there," he said.
"Iraqi forces can administer Najaf to end this phenomenon of
violence in this city that is holy to all Muslims."
US forces have been pounding Sadr's fighters - armed with light arms - with warplanes and helicopters for days.