Residents of Baghdad's Sadr City district slowly began to turn in weapons Monday, the first step in a process that U.S. and Iraqi officials hope will lead to a permanent end to fighting in the insurgent-controlled slum.

At three Sadr City police stations, heaps of AK-47 assault rifles, rocket-propelled grenade launchers, mortars and other weapons grew throughout the day. They were surrendered for cash as part of an agreement between the Iraqi government and followers of a rebellious Shiite cleric, Moqtada Sadr.

Progress at the designated police stations, where Iraqi security officials stood waiting with stacks of crisp dollar bills, was slow, and U.S. and Iraqi officials were cautious in expressing hope that the agreement would end violence in Sadr City, where U.S. forces have clashed repeatedly with members of Sadr's militia, the Mahdi Army. The five-day weapons buyback is scheduled to be followed by a $500 million reconstruction program in the sprawling slum of 2 million.

"We hope things will work out," interim Prime Minister Ayad Allawi told reporters. "If it doesn't, we will have to do whatever is necessary for the rule of law to prevail."

Soldiers from the U.S. Army's 1st Cavalry Division, which has responsibility over Baghdad, ceased patrols in Sadr City on Sunday night and were operating only at traffic checkpoints. No fighting was reported in the district.

The pacification of Sadr City represents another stage in the U.S. military's effort to reclaim insurgent-controlled areas before nationwide elections in January. Over the past two weeks, U.S. and Iraqi forces have launched an offensive to regain control of the city of Samarra and conducted raids in Babil province, southwest of Baghdad.

However, violence has not been eradicated in places ostensibly under government control. In a suicide attack Monday morning in the northern city of Mosul, a bomb that was concealed beneath crates of fruit and vegetables on a truck exploded next to a military convoy. One U.S. soldier and two Iraqi civilians were killed, and nine soldiers were wounded.

In southern Baghdad, two U.S. soldiers were killed and five were wounded in a rocket attack, the Associated Press reported.

Meanwhile, in the city of Hit, about 100 miles northwest of Baghdad, U.S. warplanes bombed a mosque from which insurgents had engaged in a three-hour firefight with U.S. Marines. The airstrike damaged the mosque and set it ablaze, the U.S. military reported.

"Mosques are granted protective status due to their religious and cultural significance," the military said in a statement. "However, when insurgents violate the sanctity of the mosque by using the structure for military purposes, the site loses its protective status."

The extent of the damage to the Sharqi mosque was unknown, as was the number of casualties.

The insurgents in Hit reportedly included foreign fighters who fled Fallujah, the target of a prolonged U.S. bombing campaign. Residents said the insurgents told them they had come to liberate Hit, as they had liberated Fallujah. They said some local police officers had left their jobs in the face of threats that they would be killed.

A banner hanging from a mosque in Hit read: "Freedom is not given. It is taken by force."

It was unclear how the fighting in Hit might affect negotiations aimed at ending fighting in Fallujah. Those talks continued Monday in Baghdad, where interim Defense Minister Hazim Shalan met with representatives of Sunni Muslim insurgents. U.S. military officials believe that Fallujah is the base of operations for Jordanian-born militant Abu Musab Zarqawi, the most wanted man in Iraq. Zarqawi's organization, Monotheism and Jihad, is believed to be opposed to any accord over Fallujah.

A Turkish contractor and an Iraqi Kurdish translator who apparently worked with U.S. forces were shown being beheaded on a video posted on the Internet Monday. A statement said the men had been kidnapped by the Ansar al-Sunna Army, the same group that asserted responsibility for the slaying of 12 Nepalese hostages in August. About 150 foreigners have been kidnapped in Iraq since April.

Payments for weapons handed over in Sadr City on Monday reportedly ranged from $5 for a hand grenade to $150 for an AK-47 to $2,000 for a highly specialized mortar. It appeared that both noncombatants and Mahdi Army insurgents were taking part in the buyback.

Abdulla Abu Ghassan, a bakery owner, received $1,200 after turning in a grenade launcher, an assault rifle and ammunition, all of which he said he had kept after serving in the now-disbanded Iraqi army.

"I'm not connected to the Mahdi Army, but I think this is a good opportunity to end the fighting and achieve peace," he said. "The situation was very good yesterday. We did not hear any explosions, and we slept quietly. We really hope to live a normal life."

At the Habibiya police station, the largest of the three designated sites, just three handovers were observed during a period of three hours, Reuters reported. They included a stash delivered by a Mahdi Army fighter who identified himself as Kamel Hussein. He received $14,500 for several rocket-propelled grenade launchers and mortars.

Col. Mahdi Charek Zayer, commander of the 306th Iraqi National Guard Battalion, said the turnout was "fairly good today, but we hope tomorrow people will realize that the process is real and more will come forth."

Special correspondent Bassam Sebti contributed to this report.

An Iraqi National Guardsman displays a mortar shell obtained in a buyback program in Sadr City.