Members of the Iraqi national guard pulled back from an al-Sadr office in Najaf after appearing to be readying for an assault on Monday.
The move came after an apparent intervention from senior Shia Muslim cleric Ayat Allah Ali al-Sistani.
The office had no armed guards or fighters, an al-Sadr spokesman told Aljazeera, describing the encirclement as a provocation.
A spokesman for the al-Sadr office in Nasiriya told Aljazeera earlier that a meeting was under way at al-Sistani's office with the Najaf governor, representatives of the Shia Supreme Council and al-Sadr himself.
"The meeting is a closed session," spokesman Aws al-Khafaji said.
The Imam Ali shrine in Najaf was the site of a recent tense three-week deadlock between al-Sadr supporters and Shia Muslims inside the complex and Iraqi and US forces surrounding it. Clashes left many dead.