Four large explosions were heard near the shrine early on Monday as AC-130 warplanes pounded al-Mahdi Army positions around the Imam Ali mosque and near the cemetery, witnesses said.
In the latest round of clashes, al-Sadr aide Ahmad al-Shaibani told Aljazeera US military helicopters and heavy artillery on Sunday bombed the old sector of Najaf.
He said shells fell in the vicinity of the Imam Ali shrine and a tank round caused a big hole in the outer wall of the shrine.
Several people were also killed and injured inside the shrine, he added.
Earlier, US-led troops exchanged fire sporadically with al-Mahdi Army fighters besieged in and around the Imam Ali mosque in Najaf, witnesses told Aljazeera.
US tanks reportedly advanced within a few hundred metres of the religious site and drew fire from resistance fighters as helicopters flew overhead.
Hours earlier, a US AC-130 warplane rained cannon fire on al-Mahdi Army positions near the mosque.
A direct attack on the Imam Ali
mosque risks inflaming Muslims
In the neighbouring town of Kufa, where al-Sadr has often led Friday prayers, clashes between US troops and al-Mahdi fighters on Saturday killed 40 militiamen and civilians, the Interior Ministry said on Sunday.
Since fighting flared between al-Sadr's fighters and US-led Iraqi government forces on 5 August, Najaf's general hospital has reported 52 deaths and 223 people wounded.
Doctors at the shrine's makeshift clinic said 71 people had been killed and 62 others wounded.
The latest clashes came as talks to end the near three-week crisis seemed to stall.
Al-Sadr aides have said they still want to hand over the administration of the site – which houses the highly revered Imam Ali shrine – to Iraq's most senior Shia Muslim authorities.
But negotiations to place the shrine under the administration of Ayat Allah Ali al-Sistani have been suspended, al-Sadr aides were quoted as saying on Sunday.
An al-Sadr spokesman in Baghdad, Raid al-Kadhumi, told Aljazeera the al-Mahdi Army wanted al-Sistani's representatives to help conduct an inventory of the many priceless artefacts housed in the shrine before it withdrew, to avoid any subsequent suspicions of impropriety.
"But our brethren at al-Sistani's office wanted us to leave the shrine [first] and hand over the keys, which was not logical," said al-Kadhumi.
He said his movement was willing to meet any government delegation "to implement what we have already agreed" but that no delegation was forthcoming.
US-led forces have massed close
to the militiamen's positions
Confusion has clouded the progress of peace talks between al-Sadr's movement, representatives of al-Sistani and the government of interim Prime Minister Iyad Allawi in recent days, with various sides offering conflicting reports and misinformation.
The Iraqi Interior Ministry on Friday declared police had entered the Imam Ali mosque and arrested about 400 militiamen.
But US military sources and Najaf police themselves later denied the ministry's statement. Al-Sadr aide Ahmad al-Shaibani, speaking from inside the site, told Aljazeera the claims were "laughable".
Allawi is under severe pressure to end the crisis in Najaf, and has warned al-Mahdi fighters to surrender or face a decisive military strike.
But he is reluctant to approve a direct assault on the mosque, a move which risks inflaming Muslim opinion against him. There is already some visible damage to the mosque's minarets from recent fighting.