The bomb, which also wounded more than 140, detonated outside the Imam Ali mosque as Ayatollah Mohammed Baqir al-Hakim emerged after a delivering a sermon calling for Iraqi unity. The attack was viewed by many as an assassination.
U.S. officials fear the bombing could ignite sectarian violence between Shiite and Sunni muslims, reports CBS News Correspondent Kimberly Dozier. For Washington, this could lead to the worst-case scenario: an Iraqi civil war pitting Shite versus Sunni.
While many here blamed the attack on the Sunni Muslim followers of Saddam Hussein, there has been inter-Shiite violence recently in Iraq. Najaf is the headquarters of Iraq's most powerful Shiite rivals, including followers of Grand Ayatollah Muhammad Ishaq al-Fayyad, Ayatollah Ali Hussein al-Sistani and Moqtada al-Sadr. Shiites make up about 60 percent of Iraq's population.
The blast gouged a 3½-foot crater in the street in front of the mosque, tore apart nearby cars and reduced neighboring shops to a tangled mass of metal, wood and corpses.
Ivan Watson, a correspondent for National Public Radio, said he was standing outside the mosque when the bomb exploded — "a deafening thunderclap" that sent flames 30 feet in the air just after al-Hakim finished his sermon.
"I saw al-Hakim walk out of the shrine after his sermon and moments later, there was a massive explosion. There were many dead bodies," said Abdul Amir Jassem, a merchant who was in the mosque.
The toll of 75 dead and 142 wounded was released by Dr. Safaa al-Ameedi, director of Najaf's main hospital, after a survey of the city's medical facilities. The toll was expected to rise, and Arab satellite broadcasters Al-Jazeera and Al-Arabiya both reported 82 people dead and 229 wounded.
Hours after the bombing, residents screamed in the streets in grief and anger. Some attacked reporters, while others continued searching through the debris for more victims.
Men and women pressed their hands and faces against the doors of the mosque, which was closed after the blast. Mosaic tiles were blown off the gold-domed building, a sacred Shiite shrine where the Imam Ali, the son-in-law of the Prophet Muhammad is buried. The building, which is visited by tens of thousands of pilgrims each year, appeared only slightly damaged.
The bombing was certain to complicate American efforts to pacify an increasingly violent Iraq.
Ahmad Chalabi, the leader of Iraqi National Congress and a Governing Council member, blamed the attack on those behind the Aug. 19 suicide truck bombing at the U.N. headquarters in Iraq that killed at least 23 people and injured more than 100. He offered no evidence to support his claim.
"I don't hold the American forces responsible for the al-Hakim assassination," he told Al-Jazeera. "But I hold the coalition forces responsible for security in Iraq. The Americans have taken responsibility for security in Iraq and I appeal to them to keep the peace."
No coalition troops were in the area of the mosque out of respect for the holy site, Pentagon spokesman Lt. Col. Jim Cassella said in Washington. U.S.-led troops have been asked to stay away from the mosque by Shiite officials.
An Associated Press reporter in Najaf on Thursday saw no U.S. troops in the city, which is 110 miles south of Baghdad. However, after the bombing, American troops stood guard outside the city's main hospital although they were not in the area around the mosque. Spanish forces, assuming control of the region from the U.S. Marines, were seen in small numbers on the outskirts.
In Washington, Defense Department officials said the Iraqi police would lead the investigation into the bombing, and U.S. investigators would assist only if asked.
L. Paul Bremer, the top U.S. civilian official in Iraq, denounced the bombing, saying it demonstrated that "the enemies of the new Iraq will stop at nothing."
"Again, they have killed innocent Iraqis. Again, they have violated one of Islam's most sacred places. Again, by their heinous action, they have shown the evil face of terrorism," Bremer said in a statement.
In Crawford, Texas, White House spokeswoman Claire Buchan condemned the bombing, saying the United States is "resolved to defeat terrorism and to continue to work to bring a better life to the Iraqi people."
Iranian political analyst Morad Veisi said from Tehran that the killing of al-Hakim "is a blow to Iraq's unity" by those who seek to sow discord between Shiite and Sunni Muslims.
"The killing appears to have sought to deny Shiite Muslims an effective role in Iraq's future at a time when Iraq is gradually preparing for elections," he said, adding that the United States shares the blame for failing to provide adequate security.
While the Shiites themselves are battling for control of the sect and its future, there was no evidence the bombing was the work of the younger Shiite faction. That group has strongest support in Baghdad's Sadr City slum and has been trying to wrest control from al-Hakim followers.
About 1,000 al-Hakim followers demonstrated in front of the headquarters of the Supreme Council for Islamic Revolution in Sadr City. Some sat weeping; others shouted for revenge.
Al-Hakim, 64, was the council's leader, dividing his time since the end of the war between Tehran and Najaf. The council had been formed in Iran during the exile of many leading Shiites.
The ayatollah belonged to one of the most influential families in Iraq's Shiite community. His brother, Abdel-Aziz al-Hakim, is a member of the U.S.-picked interim government and led the armed wing of the Supreme Council for Islamic Revolution in Iraq, headquartered in Iran before the war.
Younger Shiites have been fighting for power with the more traditional Shiite Muslims in the city and region, trying to grab control from the al-Hakim family.
Sheik Muqtada al-Sadr, who is not yet 30, and his young followers have sought to replace more traditional Shiite factions, portraying themselves as the ones doing the most to redress decades of suppression under Saddam.
Students of Shiism, however, say al-Sadr draws most of his support from the historical following developed by his father, a leading Shiite academic murdered by Saddam.
The power struggle has centered on Najaf, the holiest Shiite Muslim city in Iraq.
The blast came a week after a bombing at the Najaf home of another of Iraqi's most important Shiite clerics killed three guards and injured 10 others. It exploded at the home of Mohammed Saeed al-Hakim — a relative of the slain ayatollah — just after noon prayers Aug. 24.
A day after Saddam's ouster, a mob at the Imam Ali mosque hacked to death Abdul Majid al-Khoei, a Shiite cleric who had just returned from exile, at a meeting called to reconcile rival groups.
Earlier Friday, attackers fired rocket-propelled grenades at two U.S. convoys in separate ambushes, killing one American soldier and wounding six, the U.S. military said.
The death raised the number of U.S. soldiers killed in Iraq to 282. Of those, 67 have died in combat since May 1, when President Bush declared an end to major combat operations in Iraq.