Violence also continued in Baghdad, with the third fatal car bomb in as many days. A car has blown up in a busy northern Baghdad neighbourhood, killing at least five people and wounding more than 35, including children, police and hospital officials say.

West of the capital, insurgents fired mortars at a police station near the guerrilla stronghold of Fallujah, killing an Iraqi civilian and wounding three people, including a US Marine.

Explosions rocked the industrial sections of Kufa, where Shia leaders have been struggling to save a shaky cease-fire. Many of the injured suffered shrapnel wounds from a mortar round that missed a US convoy, witnesses said.

Gunfire reverberated through the largely deserted streets as Sadr fighters took positions near the mosque, where gunbattles have raged in past days. Tanks and Humvees rolled into the center of the city at midmorning, prompting terrified civilians to scramble for cover.

Five people were killed in the fighting, hospital sources said. In skirmishes lasting about an hour, two militiamen were injured, fighters said.

Al-Sadr's forces and US troops also exchanged gunfire in the Shia district of Baghdad known as Sadr City, killing one fighter and injured three, officials in al-Sadr's office said.

Fighters threatened to conduct suicide operations if talks meant to calm the situation failed.

"We will use explosive belts to attack the US tanks," said one fighter, Ali Hussein.

The car bomb in Baghdad exploded in the city's Azimiyah district in the north of the capital. Hospital official Nazdar Kadhim said five Iraqis died and 33 were hurt, including five children. Wailing relatives of the injured gathered at the hospital, only to be stopped from going into the emergency room.

Witnesses said two blasts occurred -- an initial explosion followed by a second one that went off just as a crowd had gathered. A convoy of sport utility vehicles, favored by Western contractors, had passed by moments before the bomb went off.