Riyadh al-Nouri, al-Sadr's brother-in-law, offered no resistance when American troops raided his home during a series of clashes in this Shiite holy city, according to Azhar al-Kinani, a staffer in al-Sadr's office in Najaf.
The capture of al-Nouri would be a major blow to al-Sadr's al-Mahdi Army, which has been battling coalition forces since early April. Al-Sadr launched his uprising in response to a crackdown by coalition authorities.
During the clashes overnight, militants fired rocket propelled grenades and mortars during three hours of skirmishes that ended about dawn, residents said.
Fighting around some of the holiest cities of Shia Islam has angered many Shiites in Iraq and elsewhere and has led to calls for both the Americans and the militiamen to pull back from the shrines.
On Tuesday, the Imam Ali shrine in Najaf received slight damage. Both U.S. and Shiite forces blamed the other for the damage.
In other developments:
Prime Minister Tony Blair said the new Iraqi government should have the power to veto major military operations proposed by coalition troops when it assumes sovereignty.
But Secretary of State Colin Powell said that "if it comes down to the United States armed forces protecting themselves or in some way accomplishing their mission" in a way not in accord with the Iraqis, the U.S. forces "will do what is necessary to protect themselves."
A leading member of the U.S.-appointed Iraqi Governing Council said Tuesday he wanted the U.N. resolution to be "clarified," to spell out the relationship between multinational troops and the interim government.
"We want to make it absolutely clear that the multinational force is in Iraq with the consent of the Iraqi government and that its operations and activities will be conducted in agreement and consultation with the Iraqi government," Adnan Pachachi told the BBC. "It is our understanding that any operations would have to have the approval of the Iraqi government."
The uncertainty over troops underscores one of the many pieces of unfinished business as the United States begins the final push toward handing over political control to an interim Iraqi government by June 30. The administration said Tuesday the new Iraqi leaders will be named by early next week.
Hussain Shahristani, a Shiite nuclear scientist jailed by Saddam for refusing to participate in weapons programs, has been named as a possible prime minister.
Officials are still investigating the origin of the sarin bomb, which was made from an artillery shell designed to disperse chemicals on the battlefield. Several military officials have speculated that the shell may have been an older one that predated the 1991 Gulf War.
U.S. military officials also don't know whether the bombers were aware that they had a chemical weapon because the shell bore no labels to indicate it was anything except a normal explosive shell, the type used to make scores of roadside bombs in Iraq.
No one was injured after its initial detonation, but two American soldiers who removed the round had symptoms of low-level nerve agent exposure, officials have said.
The shell was a binary type, which has two chambers containing relatively safe chemicals until they are mixed. When the round is fired from an artillery gun, rotation of the shell mixes the chemicals to create sarin, which is supposed to disperse when it hits its target.
Saddam's alleged stockpile of weapons of mass destruction was the Bush administration's chief stated reason for invading Iraq, but U.S. weapons hunters have been unable to validate the prewar intelligence that described those stockpiles.
Some trace elements of mustard agent, an older type of chemical weapon, were detected in an artillery shell found in a Baghdad street this month, U.S. officials have said. They believe that shell also was from one of Saddam's old stockpiles.