A sharp rise in sectarian tensions between Shia and Sunnis, Iraq's two main communities, and a continuing Sunni Arab insurgency against the Shia-led interim government has led to fears that the event could be a target.
A mortar round landed in the city's western district on Sunday, causing brief alarm, but police said there were no casualties.
The streets of Kerbala, 110km (68 miles) southwest of Baghdad, were crowded with pilgrims, waving green, black and red flags, arriving for Arbain, mourning the defeat of Prophet Mohammad's grandson al-Hussein in a 7th century battle that sealed Islam's schism.
At least 8000 Iraqi police and soldiers have been deployed in the city for the event. Local officials say they expect as many as two million people to attend the mourning ritual on Monday, many having walked from Baghdad or farther afield.
Samer Kathum as he took rest from his 400km (250 mile) pilgrimage in a tent outside Kerbala, said: "I walked here from Basra to declare loyalty to Imam Hussein; but I'm afraid because I expect a blast to kill me at any minute."
Iraqi soldiers check a crater after
a mortar attack in Kerbala
At least four pilgrims walking from Baghdad were killed in shootings and a roadside bomb blast in the past two days.
In March 2004, attacks on pilgrims in Kerbala and Baghdad killed more than 170 people.
Abdul-Razzak al-Ta'ee, police chief said: "We have deployed 8000 soldiers and police. The police are protecting the inside of Kerbala while the army is working outside the city."
Residents said police were patrolling the streets with members of the Shia al-Mehdi Army militia of radical Islamic cleric Moqtada al-Sadr. Ta'ee said plain-clothed police officers were mingling with pilgrims, their weapons concealed.
A sand bank has been built around the city to control access, residents said. Police set up checkpoints up to 20km (12 miles) from the city and told pilgrims arriving by car to leave their vehicles and proceed on foot.
The US military said earlier this week 650 troops held in reserve in Kuwait were being sent to provide additional security during Arbain and the formation of a new government.
Pilgrims walk along a road from
Hilla to Kerbala on Saturday
Arbain is the 40th and final day of mourning for al-Hussein, grandson of the Prophet Mohammad. Al-Hussein was killed in 680 in a battle at Kerbala.
Many pilgrims beat themselves and slash their heads with swords and flails to express their grief during the ceremony, which was banned by Saddam Hussein.