"Thrusting the religious establishment into daily political affairs could distance it from its guiding role and disrupt relations between the political forces, which could create an imbalance," his National Accord Party said in a letter sent to Shia and Kurdish politicians.
"Everyone must agree on the role of the religious leadership in the interim period," it said. The state-owned Al-Sabah newspaper published the letter on Saturday.
Public criticism of Ayat Allah Ali al-Sistani, Iraq's most influential Shia cleric, is almost unheard of in the country.
It could deepen a political crisis sparked by the failure to form a government after the 30 January elections.
The criticism comes as Kurdish and Shia parties, which between them have the two-thirds majority needed to form a government, are struggling to decide on a cabinet and top jobs.
A member of the Shia United Iraqi Alliance on Saturday rejected Allawi's criticism.
Speaking to Aljazeera by telephone from Baghdad, Walid al-Hilli said al-Sistani's group, the Religious Reference, had helped democracy by urging Iraqis to participate in the January elections.
Neither al-Sistani nor his office formally backed a party in the legislative election, al-Hilli pointed out.
"Thrusting the religious establishment into daily political affairs could distance it from its guiding role and disrupt relations between the political forces, which could create an imbalance"
Interim Prime Minister Iyad Allawi's National Accord Party
Al-Sistani approved of Allawi when he became interim prime minister in June, Shia politicians say, but now endorses Ibrahim al-Jafari, a religious Shia, as the bloc's candidate for prime minister.
Despite assurances by the Shia bloc that it supports multiparty democracy, concern has been growing that Iraq could slide towards Islamic rule and become less tolerant.
Al-Sistani's aides have said he does not want an Iranian-style Islamic state.
Last week, Shia activists attacked a group of male and female university students having a picnic together in Basra, provoking an outcry from secular parties.
Allawi's relations have been uneasy with the Najaf seminary, where al-Sistani is based.
Interim Health Minister Ala Abd al-Alwan, an Allawi ally, left Iraq several weeks ago after religious conservatives threatened to kill him for sacking other conservatives in the ministry, officials said.
The interim prime minister's secular stance and opposition to firing en masse former members of Saddam Hussein's Baath Party helped him win 40 seats in the 275-member parliament in January's elections.
Both the Shia and Kurdish blocs have been trying to persuade Allawi to join a new government, but he has refused, saying new guidelines are needed on how to treat Baath Party members and militias that have sprung up in post-war Iraq.
"The Debaathification commission needs to abandon randomness and adopt legal ways to punish the criminals and allow the rest to participate in rebuilding," the letter said.
"A national unity programme requires shunning collective punishment and creating a mechanism for those who are not represented in parliament to participate in writing the constitution and the political process," said Allawi, referring to the Sunnis.
That minority community, which enjoyed power under Saddam, a Sunni, won only 17 seats in parliament after a widespread boycott of the elections and fears of reprisals by fighters against voters.