The battle for Iraq's Shiite-populated south that engaged U.S. forces again Saturday is presenting U.S. officials with a more serious political challenge than the insurgency's still potent strongholds farther north, U.S. officials and Iraqi political leaders say.

In heavy fighting over the past week, U.S. forces have inflicted substantial casualties on the Shiite Muslim militia loyal to Moqtada Sadr, a breakaway cleric wanted by U.S. forces on murder charges. U.S. and British troops battled Sadr's forces Saturday in four southern cities, including new fighting in Amarah near the Iranian border. Firefights between U.S. forces and insurgents in the east Baghdad slum named for Sadr's assassinated father left 14 insurgents and two U.S. soldiers dead overnight Friday.

The fighting reflects the U.S. strategy of squeezing Sadr militarily while allowing a group of local Shiite leaders to broker a deal, much as Sunni Muslim leaders did this month in the western city of Fallujah. The Americans contend that Sadr is deeply unpopular among many Shiites in the holy cities of Najaf and Karbala, where his men are ruining the local economy and have spurred many residents to flee the growing violence.

But the same divisions among Shiites that U.S. officials had hoped would help persuade Sadr to end his insurrection are among the principal reasons that a negotiated solution has not emerged. The deal reached in Fallujah, U.S. officials and Iraqi political leaders say, has little application in the south.

Fallujah has a homogeneous population of Sunnis with strong tribal ties. Sunni clerics who benefited under ousted president Saddam Hussein's rule have united with former officials from Hussein's Baath Party in support of the insurrection. By contrast, the Shiite south is divided by rival religious loyalties.

The pudgy, bearded son of a revered cleric, Sadr has used his thousands-strong militia, known as the Mahdi Army, for political leverage within a Shiite hierarchy that has long considered him a brash upstart.

Brig. Gen. Mark Hertling, deputy commander of the 1st Armored Division responsible for Karbala and Najaf, said Sadr "is attempting to gain a power base and disrupt the momentum that is leading Iraq toward a representative government."

"He believes that he needed to form a following -- a militia, in this case -- that is geared toward intimidating those who are moderate," Hertling said. "We see those joining the Moqtada militia are mostly disenfranchised, mostly unemployed younger people who are looking for leadership, looking for money and looking to fight."

Sadr was a vocal opponent of the U.S.-led occupation from the outset, and his message erupted into an armed uprising in March after U.S. officials closed his newspaper, al-Hawza, for printing articles that they said incited violence. Soon afterward, U.S. officials announced a warrant for Sadr's arrest in connection with the April 2003 killing of Abdel-Majid Khoei, a moderate cleric and potential rival who had returned from exile in Britain.

As the target of a murder charge by the occupation and the leader of a militia battling occupation forces, Sadr has become, for many, a symbol of Islamic resistance to the occupation. The insurgency he has inspired has spread to new cities and gained momentum in parts of Baghdad.

"The occupation is my enemy, and they are occupying my holy city," Sadr said in an interview Saturday with the al-Arabiya satellite channel. "There is no other alternative but for us to defend the city."

Shiite leaders say Sadr's growing stature and the divisions it is causing among Shiites could turn him into a political power broker in Iraq's next government.

During a meeting of mainstream Shiite tribal, political and religious leaders this month, several participants suggested that Sadr be given a role in the interim government scheduled to assume limited political authority from the Americans on June 30. Even the idea represents a sharp shift in Sadr's political standing among the Shiite establishment.

"If we had this situation in other parts of Iraq, it would be a kind of civil war," said Adel Abdel-Mehdi, a senior leader of the Supreme Council for the Islamic Revolution in Iraq, a prominent Shiite political party. "We are in a large discussion right now about the new government and who might be a part of it."

Since late March, Sadr has been in Najaf and the nearby city of Kufa, taking refuge among the holiest shrines in Shiite Islam. His Mahdi Army has fired on U.S. forces from inside shrines and mosques there and in Karbala, according to military spokesmen.

The fighting has spurred many residents of those cities to flee in increasing numbers. Many who have stayed are angry not only at the effect the violence has had on the local economy but by the peril it places on the Shiite shrines. Anti-Sadr demonstrations have sprung up -- and been broken up by the Mahdi Army.

The Supreme Council for the Islamic Revolution in Iraq also has a presence in Najaf and an armed wing, known as the Badr Brigades. Sadr has warned the council's militia not to be drawn into a fight against him and said Saturday that forming a local brigade including his men was a requirement for any political settlement.

"The Mahdi Army is composed of Iraqis, so it's normal that some of its men will join the new brigade, as long as the force is independent and the occupation forces don't interfere in forming it," said Qays Khazali, Sadr's spokesman in Najaf. "I think people will accept this idea. I talk to people here and I see they like the idea. It's a lot better to solve the problem in this way."

U.S. military officials have suggested publicly that once the Mahdi Army has disbanded, its members could join such a force, even though they are avowed enemies of the occupation. But Khazali said the United States has rejected the idea, and negotiations over whether it could be formed have stopped for the moment.

"Najaf has political stakeholders, tribal sheiks and a very organized moderate religious element," Hertling said in downplaying the possibility of forming the brigade. He said sending in a battalion of the Iraqi Civil Defense Corps, one of several security forces being assembled and trained by the Americans, would "better address the requirements needed in this situation."

The improvised agreement that ended the Marines' month-long siege of Fallujah established a local militia to patrol the city, led by Iraqi generals who served under Hussein. But while bringing a measure of peace to the city, the Fallujah Brigade also embittered many Iraqis and some inside the U.S. occupation authority for the message it seemed to send. Shiites, in particular, were stunned by the sight of Hussein's former generals in olive-green uniforms wielding power a year after U.S. officials dissolved the army.

There are also signs that it may not be providing the security its leaders promised. At least two Marines were killed last week near Fallujah in roadside ambushes.

Special correspondent Omar Fekeiki contributed to this article.

A militiaman armed with a rocket-propelled grenade launcher patrols Sadr City, a predominantly Shiite slum in Baghdad where the U.S. military said two soldiers and 14 insurgents were killed in fighting overnight Friday.