The gas cylinder bomb was placed along the outside wall of the home of Mohammed Saeed al-Hakim in Najaf, one of Shiite Islam's holiest cities. It exploded after noon prayers.
The cleric suffered scratches on his neck, said Abdel-Aziz al-Hakim, a member of Iraq's U.S.-picked Governing Council and leader of what was the armed wing of the Supreme Council for Islamic Revolution in Iraq, headquartered in Iran before the war.
Al-Hakim is one of the most influential families in the Shiite community.
Meanwhile, Iraqis with ties to Saddam Hussein's once-feared Mukhabarat intelligence agency said former Iraqi agents would work with Americans inside Saddam's former presidential palace where the American-led coalition has its headquarters.
"It was obvious they would have to turn to the Mukhabarat, they knew everything in this country," said one of the Iraqis, who refused to be named.
In other developments:
Coalition spokesman Charles Heatly, responding to questions about recruitment of former Saddam intelligence officers, said U.S. military intelligence and civilian authorities were "not leaving any stone unturned to uncover the people who are conducting attacks against the Iraqi people and the coalition forces. And they will continue." The recruitment efforts were first reported in Sunday's Washington Post.
The Mukhabarat was the foreign intelligence branch of Saddam's regime and its very name struck fear in the hearts of ordinary Iraqis.
Bremer, in a broadcast interview, said it's hard to tell if more terrorists are in Iraq now than before the war, but a "large number" of foreign terrorists — perhaps several hundred — have come into Iraq and some who had been in Iraq before the war are returning.
Bremer also reiterated a Bush administration claim of pre-war ties between Saddam's regime and al Qaeda.
Besides anti-U.S. violence, ethnic and religious rivalries persist in Iraq.
Iraqi newspapers reported last week that the cleric al-Hakim had received threats against his life. He also is one of three top Shiite leaders threatened with death by a rival Shiite cleric shortly after Saddam Hussein was toppled April 9.
Al-Hakim blamed "terrorist groups who belong to the former regime," for the attack. Najaf residents rushed to the ayatollah's house after the explosion, which shattered windows and damaged a wall, he told The Associated Press.
In the north, the cities of Kirkuk and Tuz Kharmato were quiet Sunday as Iraqi police and U.S. troops maintained a heavy presence after two days of deadly violence between Iraqi Turkomen and Kurds.
A third Turkoman, injured in weekend ethnic violence in the north of the country died from his wounds, Turkey's Anatolia news agency reported Sunday.
The Turkomen claimed the violence started Friday after Kurds damaged a newly reopened Turkomen Shiite shrine and spread the next day to Kirkuk where two Turkomen hero statues were hit by rocket-propelled grenade fire.
Two U.S. soldiers died in non-combat incidents, the U.S. military reported Sunday.
A soldier from the 3rd Armored Cavalry Regiment in Baghdad was killed in a friendly fire incident on Saturday, while a second soldier from the same regiment drowned in the Euphrates River, west of Ramadi, also on Saturday.
At the battered Canal Hotel compound, the United Nations Baghdad headquarters, U.N. workers who had not left Iraq after Tuesday's attack resumed work in a cluster of tents set up in the compound.
Investigators and soldiers searched piles of debris for human remains and clues in the truck bombing that killed at least 23 people, including top U.N. envoy Sergio Vieira de Mello, whose memorial was held Saturday in his native Brazil.
One of the envoy's dying wishes was for the United Nations to remain in Iraq and continue work to establish democracy, U.N. Secretary-General Kofi Annan told mourners.
"Let us respect that," Annan said. "Let Sergio, who has given his life in that cause, find a fitting memorial in a free and sovereign Iraq."
On or since May 1, when President Bush declared major combat operations over, 137 U.S. soldiers have died in Iraq, according to the latest military figures. Counting only combat deaths, 65 Americans and 11 Britons have died since the Bush declaration.