The most influential leader of Iraq's Shiite Muslim majority, Grand Ayatollah Ali Sistani, endorsed the country's new government Thursday and demanded that it swiftly assume "full and unflawed" national sovereignty with power to end the U.S. military occupation.

The endorsement from Sistani, in a statement, was seen as a boost to the legitimacy of the interim government that was sworn in Tuesday behind a U.S. security perimeter and assigned to lead Iraq to its first democratic elections by January. But the demand that it obtain complete sovereignty foreshadowed difficult times ahead for the Bush administration, which has insisted on retaining command over the 138,000 U.S. troops still engaged in fighting a persistent insurgency.

Apparently with that in mind, Sistani declared that one of the interim government's most urgent tasks is trying to obtain "a clear resolution from the Security Council returning to Iraqis sovereignty over their land, full and unflawed in any of its political, economic, military or security aspects, as well as to strive to remove all the consequences of the occupation."

The United States has pledged to hand over formal sovereignty to the interim government on June 30, when the U.S.-run Coalition Provisional Authority under L. Paul Bremer will be replaced by a large U.S. embassy under a veteran trouble-spot diplomat, John D. Negroponte. But alongside the transfer of civilian power -- or at least its trappings -- U.S. commanders will continue giving the orders in security matters, even if Iraqi officials have different ideas, the administration has said.

The extent of Iraqi sovereignty over security and military questions has become a subject of debate between the United States and China, Russia and France in preparations for a U.N. Security Council resolution that is to authorize the interim government's June 30 takeover. Iraq's foreign minister, Hoshyar Zubari, flew to New York immediately after being sworn in to make sure Iraq took part in the discussions about its status.

Sistani said the interim Iraqi government should have been "born out of free, honest elections, in which the people of Iraq would participate." In fact, it was picked in secret negotiations among Bremer, U.N. envoy Lakhdar Brahimi and returned Iraqi exiles. For that reason, Sistani said, it does not have the required legitimacy and support from all segments of Iraqi society.

The need for speedy and wide-open elections has been a constant refrain from the reclusive cleric, who is in his mid-seventies. Although he rarely ventures from his home in the holy city of Najaf, 90 miles south of Baghdad, Sistani enjoys wide respect among Iraqis because of his knowledge and his deliberate nature. Therefore, his call for full sovereignty was likely to find a large audience.

Mohammed Jamal, 36, who sells food from a small market in Baghdad's prosperous Mansour neighborhood, was even harsher than Sistani in his judgment of how the interim government and its new president, Ghazi Yawar, were chosen and how much power they will have.

"Frankly speaking, I don't care for this government," he said. "It does not make any difference if Ghazi Yawar is president or not. It is all under the control of the Americans. Let's not deceive ourselves."

Salah Ali, 38, a merchant encountered in a nearby shopping center, echoed Sistani's demand for full sovereignty but expressed doubt that things will work out that way. "How will this government get sovereignty while it is still under the control of the Americans?" he asked. "I doubt it will have full sovereignty."

Ahmed Chalabi, an exile leader who long pushed for U.S. military action against former president Saddam Hussein, also embraced Sistani's insistence on full Iraqi sovereignty. Chalabi, once the Pentagon's pick to run Iraq, has fallen from favor in Washington over suspicion he passed U.S. secrets to Iran. He has spent the last week in Najaf, missing the formation of the new government.

"This fatwa is a road map for Iraqi political action in the coming period," Chalabi, a secular Shiite, said of Sistani's edict.

Sistani's devotion to democratic principles also has a practical side: With Shiites making up about 60 percent of Iraq's 25 million inhabitants, democratic voting would likely give them the largest share of power. In that vein, he also demanded that next January's elections choose an assembly "that is not obligated by decisions taken under the occupation" -- in other words, with power to undo some of the decisions by Bremer and the U.S.-appointed Governing Council that was replaced Tuesday.

Despite the criticism, Sistani's statement was decidedly more positive than anything he said about the Governing Council. He expressed wishes for God's help to the new administration even as he warned it "will not win popular support unless it proves, through clear, practical steps, that it is seriously and honestly striving to accomplish the aforementioned tasks."

One of those tasks, he said, was to "provide security in all parts of the country and end all organized crimes and other criminal acts." That was seen as an indirect condemnation of the violent insurgency that has arisen in recent months against U.S. occupation troops, including resistance by another Shiite cleric, Moqtada Sadr, and his militia, known as the Mahdi Army

Sadr's militia clashed with U.S. soldiers for two hours at dawn Thursday near the main mosque in Kufa, which adjoins Najaf and its Shiite shrines. The fighting was more evidence that a week-old truce between Sadr and U.S. forces has collapsed.

The fighting killed five civilians and wounded 15, according to officials at Furat Awsat hospital in Kufa. CNN, which has a reporter with the U.S. troops, said two U.S. soldiers were slightly wounded. There was no word on militiamen killed or wounded.

Sadr's forces, which took over Najaf and Kufa two months ago, were supposed to withdraw from the streets as their part of a cease-fire accord. In exchange, U.S. forces were to limit their presence in sensitive areas surrounding Shiite shrines to joint patrols with Iraqi police. Each side has accused the other of violating the agreement.

It was unclear what effect Sistani's declaration would have on Sadr's ability to maintain support for his stand against U.S. forces. Many Najaf residents have expressed anger at the trouble he has brought their city. But the young cleric, son of a renowned Shiite leader, has his own following among the young and the poor, who may not welcome the establishment views voiced by Sistani.

The insurgency continued elsewhere as well. Several mortar rounds fell near the Italian Embassy in Baghdad, killing one Iraqi and injuring several, police told reporters. The Italian Foreign Ministry said no one inside was hurt.

The U.S. military reported, meanwhile, that a mortar round started a fire Wednesday night at a U.S. base near Kirkuk, in the Kurdish zone of northern Iraq. The blaze spread to an ammunition dump, setting off explosions and forcing evacuation of a nearby detention facility, an announcement said.

Special correspondents Bassam Sabti in Baghdad and Saad Sarhan in Najaf contributed to this report.

Iraq's interim prime minister, Ayad Allawi, left, and his deputy, Barham Salih, attend a news conference in Baghdad.