The clash appeared to be part of a power struggle in the majority Shiite community between forces of firebrand cleric Muqtada al-Sadr, a strong opponent of the U.S. military occupation, and followers of religious leaders who have taken a more moderate stand toward the Americans.
Meanwhile, about 100 people gathered at the main mosque in Fallujah, a Sunni Muslim city west of Baghdad, to demand the release of a cleric arrested a day earlier by U.S. troops. The previously unknown "Hamza Platoon" handed out flyers to the crowd threatening more attacks on U.S. troops unless the cleric is released.
In Baghdad, gunfire rattled in the streets near the Palestine Hotel before dawn Tuesday, sending police rushing to the scene. The cause was unclear and it was not known if anyone was hurt. The hotel is near the Baghdad Hotel, where a suicide car bomber killed six people and wounded dozens two days ago.
In other developments:
The trouble in Karbala started about 10 p.m. when al-Sadr's followers tried to take over the shrine of Imam al-Hussein, one of the principal religious sites in the city.
Witnesses said al-Sadr's forces and those loyal to Grand Ayatollah Ali Hussein al-Sistani, Iraq's top Shiite Muslim cleric, used small arms and rocket-propelled grenades during fighting that ended after sunrise. Al-Sadr's forces withdrew to another mosque where they were surrounded by police, witnesses said.
Residents said that up to 10 people were killed and more than a dozen wounded, but the figures could not be confirmed. Police were refusing to talk to journalists, and the atmosphere in the city, located about 50 miles southeast of Baghdad, was tense.
U.S. and Polish troops set up checkpoints about a half-mile from major religious shrines and were carefully checking people for weapons.
The defense of the administration's Iraq strategy came in a series of interviews Monday with regional television outlets that allowed Mr. Bush to take his message directly to people outside Washington.
"I absolutely made the right decision at the right time," he said to the Belo television group. "There's no doubt in my mind that the world is better off without him in power."
On criticism about continuing violence in Iraq and the slow pace of infrastructure improvements, Mr. Bush said: "There's been tremendous progress since Saddam Hussein fell. And we shouldn't make light of the fact that the hospital system is up and running and doing very well, or schools."
There have been questions about who is running the administration's Iraq policy. National security adviser Condoleezza Rice was named as head of an Iraq Stabilization Group to assert more control, as Defense Secretary Donald H. Rumsfeld grumbled that he had not been aware of the move. There also have been well-publicized tensions among Rumsfeld, Secretary of State Colin Powell and Vice President Dick Cheney over Iraq.
On accusations, including from one top Republican, that turf battles inside the administration have bogged down postwar planning, Mr. Bush said in the Tribune interview, "The person who is in charge is me."
Mr. Bush's main aim in seeking a new U.N. resolution is to get more countries to contribute troops and money to stabilize and rebuild Iraq. The resolution would authorize a multinational force — sought by some potential troop contributing nations — led by the United States.
Even if there are no further changes, the resolution is likely to get the minimum nine "yes" votes needed for adoption. France has ruled out using its veto — but some council members are concerned at the mixed message the council would send if the resolution was only approved by a slim margin.
The revised resolution would give the United Nations a larger role in Iraq's political transition to a democracy, but the world body would not be able to act independently of the U.S.-led coalition now running the country as Annan has sought.
The Bush administration revised the draft for a third time in hopes of addressing the concerns of key council nations and sending a unanimous message to Iraqis and the international community on the Security Council's vision for postwar Iraq.
U.S. Ambassador John Negroponte, the current Security Council president, scheduled closed-door consultations on the revised draft on Tuesday morning. Washington wants a vote ahead of a major donors conference for Iraq in Madrid, Spain on Oct. 23-24.