Young men in civilian uniforms and headbands, all members of what is known as the popular committees, chanted as a speaker called on them to crush "terrorists and loyalists of former President Saddam Hussein leading a Sunni insurgency against the Shia-led government".
The crowd on Wednesday included members of the Badr Organisation, one of the armed Shia groups Sunni Arabs accuse of running militia death squads, a charge they deny.
Abdul Aziz al-Hakim, one of Iraq's most powerful Shia leaders, told a crowd that "we have to benefit from this wide popular base and the state and Iraqi people should form these popular regional committees from the best of our young men to face terrorism."
"They will defend people of districts; Sunnis, Shias, Arabs, Kurds and Turkmen. They do not differentiate between anybody. They will provide support for the official security apparatus," he said.
The crowd included members of
the Badr organisation
Iraqi Prime Minister Nuri al-Maliki, whose reconciliation plan has failed to ease sectarian bloodshed, has promised to disband militias that many fear will push the country to civil war.
Officially, the event was held to mark the third anniversary of the death of Hakim's brother, Ayatollah Muhammad Baqr al-Hakim, in a bombing in the southern city of Najaf.
But the speeches also covered some of the most explosive issues in Iraq, such as federalism, which is opposed by Sunnis who fear it will leave them deprived of oil in resource-poor central Iraq.
"We believe that implementation of a federal system in Iraq will achieve justice and rebuild Iraq and guarantee the unity of the Iraqi people and land," said Hakim.
Wednesday's protests came against a background of continuing violence across Iraq.
Three roadside bombs exploded in central Baghdad near a group of labourers seeking work, killing three people and wounding nine, police said.
The bombs went off early in the morning on Wednesday in Tayaran Square, downtown Baghdad, as workers gathered hoping to be employed for construction work, the interior ministry official said.
Al-Hakim pushed for a federal
system in Iraq
The attack came a day after bombings and shootings killed up to 61 people in Iraq, including at least 26 soldiers.
A short distance away, gunmen in a car opened fire on a checkpoint outside the Ministry of Oil building about an hour later, injuring three guards, said police Lt Bilal Ali Majid.
In other developments, a man was killed when a roadside bomb he was planting on a highway exploded in northern Baghdad, police Warrant Officer Mahoud Yassin.
In Baquba, Ahmed Abdel Hussein, the chief of traffic police in the city, north of Baghdad, was gunned down along with his bodyguard and two others were wounded, police said.
In Diwaniya, a roadside bomb exploded near an Iraqi army patrol, wounding two soldiers in Diwaniya, 180km south of Baghdad.
A US soldier was killed in the western province of al-Anbar, the US military said on Wednesday.
The soldier, assigned to the 1st Armored Division based in Ramadi, was killed in "enemy action" on Tuesday.
Nine US serviceman have been killed in the past week in al-Anbar province, the scene of the fiercest anti-coalition insurgency.
According to an AFP count based on Pentagon figures, 2,579 US servicemen have died since the March 2003 invasion.