RAMADI, Iraq -- Under a blistering sun, 1st Lt. Matthew Arabian gripped his M-4 rifle and sprinted across a Ramadi intersection cratered by bombs, ducking through a hole blasted in an adjacent brick wall.

"We call that the circle of death," said Arabian, 34, of Vienna, Va., crouching to avoid snipers who target the crossroads from as far away as 900 yards. Around him were gutted buildings and trash-strewn streets, evidence of more than two years of combat in Ramadi.

"We're in the heart of an insurgent hotbed," said Arabian, his face streaked with sweat. "We've walked into their back yard."

From a new military outpost set up in a cluster of abandoned homes in Ramadi's eastern Mulaab district, Arabian and his infantry platoon are fighting for ground. Ramadi, the capital of Iraq's western Anbar province, has sunk into virtual anarchy under the stranglehold of a skilled, well-financed and ruthless insurgency. Now, for the first time, U.S. and Iraqi forces are engaged in a block-by-block campaign to retake the area.

The U.S. strategy here aims to avoid a full-scale military onslaught like the one that demolished much of the nearby city of Fallujah in November 2004, flattening hundreds of homes, emptying it of people and leaving it struggling to rebuild. The senior U.S. commander in Ramadi, Army Col. Sean MacFarland, does not rule out major combat operations. But he makes it clear he sees no value in sending U.S. troops "crashing through like a bull in a china shop."

Instead, U.S. and Iraqi forces are advancing one step at a time into key locations in Ramadi's walled neighborhoods, setting up small outposts of about 100 troops each. The goal is to slowly choke off the insurgents' ability to move freely, making them easier to capture or kill. Meanwhile, Iraqi soldiers, backed by U.S. troops, are to take the lead in patrolling around the outposts, creating small zones of safety for residents that will gradually spread.

Ramadi has lost as much as a quarter of its population of 400,000 since the insurgency began. The city has no effective government and few police officers. Insurgents assassinate officials with impunity, and recently issued a death threat against anyone entering the heavily shelled Government Center downtown. Last month, after the provincial highways director defied the threat, he was captured and beheaded, his body dumped in the street, according to a U.S. military officer.

Joblessness in Ramadi is at least 40 percent and there is no local industry, with utilities and other vital infrastructure regularly blown up by insurgents, U.S. officers say. Residents survive on irregular food rations and wait hours for fuel that often doesn't arrive. The chaos and stagnation create steady recruits for the insurgency -- estimated to have 1,500 hard-core members and hundreds more part-time fighters -- even as U.S. and Iraqi forces have killed at least 200 insurgents since June alone.

Warfare rocks the city daily. Over a one-month period this summer, insurgents launched nearly 600 attacks, laying about 250 roadside bombs, firing more than 100 rockets and mortars, waging 150 assaults with rifles and machine guns, and setting off four suicide car bombs. "The problem set is mind-numbing," said Maj. David Womack, operations officer for the 101st Airborne Division's battalion in charge of eastern Ramadi. A warning in bold type posted at the battalion's dusty headquarters advises all soldiers to "be polite, be professional, and have a plan to kill everyone you meet."

For years, there were far too few troops in Ramadi to attempt to occupy so many small, protected outposts. In 2004, a Marine battalion lost dozens of men as it fought alone to hold down two bases and the main route through the city. Since then, combat units have suffered heavier casualties here than in any other comparably sized Iraqi city. Today, Ramadi has three times as many American troops as in 2004, as well as two Iraqi army brigades, although U.S. officers say still more Iraqi soldiers are needed to secure the city.

"We're covering this area much more than it ever has been before," said Arabian. By all accounts, it's a grinding fight for each bit of ground.

At Arabian's austere outpost in the Mulaab district of Ramadi, soldiers eat mostly packaged rations, defecate in plastic bags that they burn nightly, and sleep in shifts on cots crammed into a single room. Arabian rarely sleeps -- instead, he is glued to his radio, monitoring the constant threat from insurgents seeking to overrun the base.

"Yesterday, a 120mm mortar hit us," he said, pointing to shattered glass and a partially demolished wall outside one of the houses. Several days earlier, insurgents launched a mass attack, sparking a two-hour firefight. "They're trying to figure out how to get in and cause casualties," said Arabian, who commands a platoon from the 1st Battalion, 6th Infantry Regiment, 1st Armored Division.

Enemy snipers are constantly probing for clean shots on the base. One fired a bullet through a gap in a guard tower. It went straight through the helmet of an Iraqi soldier -- though he survived.

One recent day, a U.S. sniper, Sgt. Greg Kusel of Cincinnati, fired a warning shot at an Iraqi man who often made suspicious hand signals on a street near the base. "I didn't really feel right about killing him, but I wanted him to stay off the street," said Kusel, 25, a jazz guitarist who said he joined the Army to escape the bar scene back home.

Within seconds, a return bullet impacted a wall 10 yards behind Kusel. An enemy sniper had heard or spotted Kusel's tracer round and returned fire from about 900 yards. "They have people out there watching and waiting for opportunities," Kusel said as he adjusted his rifle scope behind curtained windows. "It let me know there's some good shooters playing for the other team."

Still, the new U.S. and Iraqi presence in Mulaab, the most troubled part of eastern Ramadi, is beginning to have an effect. A mosque next door to the outpost that served as an insurgent base has been reopened for daily worship. A water tower nearby is under constant watch and so no longer offers a platform for an enemy sniper who had used it to kill U.S. soldiers.

The outpost also blocks a main route that insurgents had used to bring explosives into the city. They would stash them at a train station in the south and pay teenage boys to ferry them north at night. Until recently, U.S. troops shot the youths -- fighting what MacFarland suggests was a losing war of attrition. "We were killing these guys -- kids. We could do that forever," he said. "Were we creating more insurgents that way?"

With new bases in place, those weapons caches have been eliminated.

Key to retaking the neighborhoods are Iraqi army troops, who take the lead in patrols and raids. One moonlit night last month, a platoon of Iraqi soldiers moved quietly through Mulaab on a mission to capture the leader of an insurgent sniper team.

The Iraqi troops questioned people inside one house, only to learn that the suspect was not home. At another house, they found four men with fake ID cards and detained them. Then they searched a nearby mosque and uncovered a fresh insurgent flier. "Attention. People of God, beware," it warned. Anyone giving information to U.S. and Iraqi forces at the new outposts would be killed, it said, signed "Mujaheddin of Anbar."

After the raid, the quietly confident Iraqi company commander, a first lieutenant who identified himself only as Raad because of safety concerns, suggested that his unit, among the oldest and most experienced in the Iraqi army, had clear advantages over the Americans. His forces might lack the combat skill and equipment of the Americans; they also had seen their pay cut recently, leading scores to quit. But "we raided the mosque and the people didn't say anything," he said. "If the American forces did that, it would be a big thing and the people wouldn't stop talking about it."

Across Ramadi, mosque loudspeakers, posters and graffiti exalt the mujaheddin, or holy warriors, and call for killing Americans. Insurgents distribute CDs with short anti-U.S. movies blaming troops for injuring children, and also videos of insurgent bombings, said Capt. Rafal Panasiuk, an intelligence officer with the 1st Battalion, 506th Infantry Regiment, 101st Airborne Division. Whether out of fear or hostility, every one of a dozen Ramadi residents interviewed said they wanted American troops to withdraw from the city.

"If they pull out, it's better for us," said Abid al Fattah Awad, 68, a retired manager, as he sat in his yard in Mulaab drinking tea with his family. "We can deal with Iraqi forces, just not American forces."

Standing in his doorway, Khalif Naif Tokan, 60, a former school employee, said residents were afraid of being shot by U.S. troops or killed in airstrikes. "If they move outside the city, it's better," he said, fingering brown worry beads.

Asked whether there were any insurgents in the neighborhood, Tokan said no. But when a reporter tried to take his photograph with U.S. and Iraqi forces in the background, he turned panic-stricken. "I can't take a picture with you, or they'll kill me!" he said.