Seven Iraqis were killed and 90 others wounded in clashes between US occupation forces and al-Mahdi Army fighters in Baghdad's Sadr City, Aljazeera reported.
The clashes followed earlier skirmishes in Sadr City when a US patrol came under fire.
According to reporters and witnesses, US soldiers were driving through the troubled Sadr City with loudspeakers, demanding people stay at home because occupation forces were "cleaning the area of armed men".
"Assault rifles and rocket-propelled grenades were fired at troops patrolling the area," US Captain Brian O'Malley of the 1st Brigade Combat Team said.
O'Malley said there were no casualties among US troops.
It was not known whether any fighters were killed or wounded.
News agencies quoted Iraqi Interior Ministry spokesman Colonel Adnan Abd Al-Rahman as saying national guard troops were fighting alongside US soldiers in the skirmishes in east Baghdad's Sadr City, renamed in honour of al-Sadr's cleric father after the fall of Baghdad on 9 April.
Elsewhere in Baghdad, mortar attacks left at least two dead and scores injured.
In one incident on Saturday, two civilians were killed and another six wounded when three mortar rounds hit a compound northeast of Baghdad.
The compound housed the ministries of oil, electricity, trade and water resources, according to Iraqi Interior Ministry officials.
Another two Iraqis were wounded when a mortar shell slammed into al-Shati hotel on Saddun Street in central Baghdad.
Interior Ministry spokesman Colonel Adnan Abd Al-Rahman was again quoted by agencies as saying the two men who died in this instance were washing cars in the street near the Iraqi National Olympic Committee building when two mortar rounds landed nearby.
Witnesses told the media another four mortar shells landed in Palestine Street near the Olympic committee as cars were driving by, causing panic among pedestrians and shoppers. But it was not immediately clear whether there were any casualties.