Iran's increasing support for insurgent Shiites in Iraq is giving the fighting in Najaf the appearance of a proxy war between Iran and the United States, Jordan and Saudi Arabia.

Iran denies charges by Iraqi officials that it is interfering in Iraq but has protested U.S. efforts to remove the forces of rebel cleric Muqtada al-Sadr from Shiite Muslim shrines. Monday, Iranian Foreign Minister Kamal Kharrazi urged the United Nations to intervene to stop the fighting. "Americans once again made a grave blunder in calculating developments in Iraq and provoked the sentiments of the Iraqi people through resorting to the use of force," Kharrazi told U.N. Secretary-General Kofi Annan, according to Iran's official Islamic Republic News Agency.

U.S. officials say that for most of the year, they have been watching with alarm a buildup of Iranian spies and militants in Iraq. "We are aware that the Iranians have been engaged in some activities in southern Iraq," White House spokesman Sean McCormack said Monday. "We have encouraged Iraq's neighbors to engage in constructive activities that help Iraq on its pathway to development."

Iran, the largest Shiite Muslim nation, sees an opportunity to extend its influence in Iraq, where Shiites are also a majority, and to undermine the Bush administration, which has called Iran part of an "axis of evil." Washington is trying to rally international opinion to force Iran to give up its nuclear program.

The fighting in Najaf, a city revered by Shiites, could also help Iran's Islamic government increase its popularity in Iran.

"There's been a more aggressive Iranian pursuit of all options in Iraq," says Judith Yaphe, a Middle East expert at the National Defense University in Washington and a former analyst for the CIA who monitors developments in Iraq and Iran. "They are helping a number of elements within Iraq," including al-Sadr's Mahdi Army, she says.

Hazem Shalan al-Khuzaei, Iraq's interim defense minister, accused Iran last month of being Iraq's "No. 1 enemy" and trying to "kill democracy" in Iraq by sending spies and weapons into the country.

Last week, Iraqi security officials arrested more than two dozen Iranians in the southern Iraqi town of Kut and said they intercepted two trucks filled with weapons on the Iran-Iraq border last Wednesday.

Iran has had close ties to southern Iraq because Shiites predominate in both places. But Saddam Hussein, a Sunni Muslim, launched an eight-year war against Iran in 1980 and suppressed Iranian influence in Iraq until his overthrow last year. Since then, tens of thousands of Iranians have entered Iraq claiming to be religious pilgrims. An unknown number have remained.

Iran has retained ties to the Supreme Council for the Islamic Revolution in Iraq, an anti-Saddam group that was based in Iran until Saddam's ouster. Iran also has links to the Dawa or Islamic Call party, another important Iraqi Shiite group, and to Ahmad Chalabi, a Shiite exile leader who has fallen out of favor with the Bush administration over allegations that he provided U.S. intelligence information to Iran. Iran has established clinics and schools in Iraq as part of a campaign of economic aid that competes with U.S. assistance.