U.S. forces battled insurgents loyal to rebel cleric Moqtada Sadr Friday morning in the vast ancient cemetery in the southern city of Najaf, one of Shiite Islam's most sacred places.

In images broadcast across the Middle East on Arabic satellite channels, two U.S Army Kiowa helicopters fluttered above the sea of ochre and tan tombs on the edge of the city. Olive-green Abrams tanks, part of the 1st Armored Division, appeared to fire into the tombs. Plumes of gray and black smoke puffed up from between the grave markers.

Insurgents carrying automatic weapons and rocket propelled grenade launchers could be seen scurrying among the tombs.

In Baghdad, Brig. Gen. Mark Kimmitt, deputy chief of operations for the military in Iraq, said troops entered the cemetery to battle Sadr's forces, who had set up a position in it from which they were firing rocket propelled grenades and mortars at Iraqi police and U.S. troops.

He said the decision to send in ground forces followed attempts to use U.S. assault helicopters for the job. "The helicopters could not engage due to the proximity" of a nearby shrine, Kimmitt said.

The fight was one of several battles Friday in Najaf and in the city of Karbala as U.S. troops attempted to clear nests of militiamen firing at police or troops.

"The cemetery lost its holiness in the early hours of today when the U.S. forces started to attack," said Khalid Farhan, 55, who owns the Thulfiqar Hotel in downtown Najaf. "Many of the graves have been destroyed. But we can say that people are dying and nice buildings are being destroyed also today. Who cares right now about graves?"

The fighting represented some of the most aggressive tactics yet employed by U.S. forces against the Mahdi Army, as Sadr's Shiite militia is known.

It also appeared to signal the demise of talks to end the standoff by a negotiated agreement, something U.S. officials had hoped to accomplish through a group of mainstream Shiite leaders who appear equally incapable of corralling the young cleric.

Shiite leaders fear Sadr, who is wanted by U.S. forces for his alleged part in the murder last year of a rival Shiite cleric, is putting Najaf's gold-domed Shrine of Ali in danger by using the city as sanctuary. They have called on him to leave the city, where he has been holed up since early April, and disarm his militia.

These leaders have also called for the withdrawal of U.S. forces from the city, and a greater willingness on the part of U.S. officials to set aside the arrest warrant in order to resolve the standoff. Neither side has heeded those calls.

Wire service reports Friday that were circulated throughout the Arab world claimed that the fighting in Najaf had left bullet holes fired from U.S. weapons in the golden dome of the Shrine of Ali. Kimmitt said that based on the position of U.S. troops in Najaf, it would have been impossible for their bullets to have hit the shrine.

"It is important to understand that we have not attacked the Shrine of Imam Ali," Kimmitt said in a briefing Friday. "We continue to respect the shrine" as well as the "red line" religious clerics have identified as sacred no-go areas for U.S. troops in Najaf.

"Moqtada's militia is attempting to use those religious shrines and red lines much like human shields," said Kimmitt.

The military push Friday morning appeared to signal a strengthened U.S. resolve to stop the Shiite insurrection before it gains more momentum outside the south, the region most receptive to the U.S. occupation.

At the moment, Sadr's resistance poses among the most significant threats to U.S. plans for a smooth handover of limited authority to an interim Iraqi government, scheduled to take place June 30.

But rooting out Sadr's thousands-strong militia from the holy cities also poses political problems for U.S. officials, who say they do not want to be seen attacking Shiite Islam's holiest places in a region deeply suspicious of their intentions. The cemetery at Najaf, a maze of streets, passageways and tombs, vaults and mausoleums, is one of the world's largest burial places. For centuries, Shiite Muslim families by the millions have made pilgrimages there to lay their dead to rest.

During the past three days, U.S. forces have also fought pitched gun battles with insurgents near the Shrines of Hussein and Abbas in Karbala -- mosques the insurgents' have sought to use as refuge.

Witnesses said the Thulfiqar Hotel came under fire Friday morning as U.S. tanks rattled through the city streets.

Reporters employed by the news services Reuters, Agence France Presse and the Associated Press, as well as The Washington Post and the U.S.-funded Hurra satellite channel, reside at the hotel.

Witnesses said tank rounds struck the roof, the lobby and a courtyard behind the building, sending cameras toppling and reporters ducking for cover. Some of them suffered minor injuries. "They first made warning shots," said Farhan, the owner, who blamed U.S. tanks for the attack. "When the reporters wouldn't move [from the roof] they shot."

An aide to top Shiite cleric Grand Ayatollah Ali Sistani called Friday on U.S. forces and Sadr's militia to cease fighting and leave Najaf, the Reuters news service reported from Dubai.

Ayatollah Mohammad Baqer Mohri, Kuwait-based aide to Sistani, said the fighting was spreading fast and he feared for holy sites and for Sistani's life, Reuters said.

"The fighting is getting closer to the house of the grand ayatollah. We fear that his life will be in danger," he told Reuters by telephone.

"We ask the coalition forces and [Sadr's] Mahdi militia to quit the holy city Najaf," he said. He urged U.S. forces not to violate the sanctities of Najaf or damage its shrines and cemetery where religious clerics were buried.

Sadr, in his sermon, described President Bush and British Prime Minister Tony Blair, a key ally of Washington in the occupation of Iraq, as "the heads of tyranny."

Sadr said the two leaders had paid attention to what he described as the "fabricated" case of Nicholas Berg, an American civilian who was beheaded by militants, and had ignored the suffering of Iraqis in prisons controlled by coalition troops.

The cleric also condemned Iraqis who cooperate with the Americans and "are willing to execute the occupiers' orders."

Fred Barbash reported from Washington. Special correspondent Omar Fekeiki contributed to this story.