In September, 30 members of the Sadrist party relinquished their seats in parliament when Nuri al-Maliki, Iraq's prime minister, refused to set down a timetable for US troop withdrawal.
Al-Sadr's bloc was key in bringing al-Maliki into power especially in their then common agenda to release Iraq "out of the hands of occupation" but their support quickly waned for the leader they now see as pro-US.
Al-Obaidi said: "When we discerned that al-Maliki is depending upon American support in his work within the Iraqi scene, we decided that working and helping such a government is not helpful for the Iraqis."
Al-Sadr, who is also the leader of the Mahdi Army militia, announced a six-month truce in October in an attempt top stop rising sectarian and inter-Shia violence.
When asked about the current status of the truce, al-Obaidi said: "The ceasefire is continuing and maybe it will go to another period after six months.
"But it all depends on the actions and reactions of the [Iraqi] government, the local governorates and the American troops against us."
Al-Obaidi's comments came as Iraqi legislators suspended parliamentary sessions until the end of the month because of the Muslim religious season.
Mahmoud al-Mashhadani, a Sunni parliamentary speaker, announced on Thursday the decision to suspend sessions after days of debate over a draft bill that would allow thousands of former members of Saddam Hussein's Baath Party to return to their government jobs.
The measure is among the 18 benchmarks set by the US to encourage reconciliation.
Al-Mashhadani said the legislative body would not hold another session until the end of December because many politicians would be travelling to Mecca, Saudi Arabia, for the annual Islamic pilgrimage.