In Karbala, hundreds of Iranian and Iraqi pilgrims were trapped by the fighting in their hotels. Through the late afternoon, skirmishes continued with intermittent explosions and the rattle of small arms and heavy machine gun fire.

After one large explosion, Shiite militiamen chanted "Allahu Akbar," or God is Great, indicating they had hit a coalition target.

Pilgrims, including women in black veils, peered from the windows of their hotels, only to scramble inside with the crash of gunfire. The rickety, wooden market stalls, ordinarily crammed with shoppers, were deserted. Crowds of men gathered on rooftops to watch the distant battles.

One al-Sadr militiaman fired two mortar shells, then picked up the firing tube and scampered away shouting "I hate them, I hate them."

In other developments, the body of American civilian Nick Berg, who was beheaded in a gruesome video shown on an al-Qaeda-linked Web site, was en route Wednesday to Dover, Del., on an Air Force jet, a military spokesman said. The masked men who decapitated the suburban Philadelphia electronics businessman said they did so in retaliation for the abuse of Iraqis at Abu Ghraib.

U.S. soldiers raided houses Tuesday night in Sadr City, a Baghdad neighborhood where support for the cleric is strong, witnesses said. Three Iraqis were killed. At a funeral Wednesday for one of the men, mourners raised Iraqi flags and al-Sadr posters as they chanted: "Down, down USA!"

In the Karbala battles, American forces killed 20-25 militants, while seven coalition soldiers were wounded, a coalition official said on condition of anonymity.

A witness counted the bodies of 14 Iraqis lying in a main road in Karbala, and said U.S. snipers were targeting anyone who moved in the mostly empty streets.

Witnesses said American soldiers first tried to enter the Mukhaiyam mosque, but then traded fire with al-Sadr followers who had moved to the buildings around it. The mosque is less than a mile from one of the holiest Shiite sites in the world, the Imam Hussein shrine.

Polish Lt. Col. Robert Styrzelecki said by telephone from Camp Babylon, the Polish base on the outskirts of Karbala, that coalition forces found "huge amounts of mortar and artillery rounds, explosives and remote transmitters for detonating explosives." He did not say where the cache was found.

On Tuesday, Iraqi political and tribal leaders in Najaf said al-Sadr will end the standoff with American troops if the coalition postpones its legal case against him and establishes an Iraqi force to patrol the city.

However, the offer hinges on an agreement that U.S. forces pull out of the city and Kufa, and al-Sadr's militia lays down its weapons, the leaders said. Al-Sadr made a similar offer earlier this month.