At least 13 Shiite militants died in the clashes, which erupted Friday night and tapered off early Saturday, the U.S. military said. Iraqi police reported seven civilians were killed as a result of the fighting between U.S and government troops and al-Sadr's Mahdi Army militia.
Al-Sadr blamed the Americans and their Iraqi allies for the assassination Friday of one of his top aides, Riyadh al-Nouri, director of his office in the Shiite holy city of Najaf. Gunmen ambushed al-Nouri as he was returning home from Friday prayers.
A curfew was declared in Najaf to prevent a violent backlash by al-Sadr supporters, but it was lifted Saturday.
In Sadr City, a U.S. statement said American soldiers used Abrams main battle tanks and drone-fired Hellfire missiles in support of troops who came under sniper and rocket attack while trying to erect concrete barriers in the area.
Two armored vehicles were damaged by at least 10 roadside bombs that exploded during the operation, but there were no casualties among the U.S. and Iraqi soldiers, the military said.
The U.S. said a total of 13 extremists were killed in the various encounters.
Iraqi police and hospital officials said the seven civilians died in one of the Hellfire missile strikes.
They spoke on condition of anonymity because they are not allowed to release information. It was impossible to verify the reports independently. Sadr City is the principal stronghold of the Mahdi Army in the Baghdad area.
Government troops supported by the U.S. military have been fighting for nearly two weeks to seal off Sadr City, which has a population of about 2.5 million, after militants there fired rockets and mortars at the U.S.-protected Green Zone and other major targets.
A ban on entering and leaving the district was supposed to have been lifted on Saturday. But eyewitnesses said the blocked-off entrances were briefly opened at 9 a.m., only to be closed again after about 10 minutes.
Police later announced that one of the entrances had been opened to motor traffic. Army patrols used loudspeakers to warn residents to keep off the streets, saying the rebels had planted roadside bombs which needed to be cleared by the security forces.
The conflict in Sadr City is part of a major power struggle within the Shiite community ahead of provincial elections expected this fall.
In the southern port of Basra, Iraq's second largest city, the Iraqi army said it had started carrying out "the second phase of operations" by conducting a sweep of the city's Qibla district, looking for illegal weapons, ammunition and wanted criminals.
Last month, Prime Minister Nouri al-Maliki ordered the military to confront Shiite militias and gangs in Basra, but the offensive quickly faltered amid fierce resistance.
In Other Developments:
The announcement raises to at least 19 American troop deaths reported in the past week. Many of those have occurred in predominantly Shiite areas in Baghdad that have seen fierce fighting between Shiite militia and U.S.-Iraqi troops.
In all, at least 4,032 members of the U.S. military have died since the Iraq war started in March 2003, according to an Associated Press count. That figure includes 3,892 Americans killed since May 1, 2003, the day President George W. Bush announced the end of "major combat" operations in Iraq.
A city spokesman says 12 bodies found today had been dumped in one grave not far from the local office of radical Shiite cleric Muqtada al-Sadr's movement. He says two others were buried together nearby.
The city official and an Iraqi army officer say confessions by recently detained Shiite militiamen led to the grisly discovery. Iraqi troops found the remains of 30 other people believed to have been killed more than a year ago in three abandoned houses elsewhere in the area on Thursday.
West Qurna field, located about 40 miles west of Basra, is among Iraq's 10 "super giant" fields with its reserves estimated between 15 to 21 billion barrels, according to Iraqi Oil Ministry and Energy Information Administration.
The Iraqi Oil Ministry has said it is also negotiating with Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp. to increase crude production in four other fields and under the same agreement.
Iraq has the world's third-largest oil reserves, totaling more than 115 billion barrels. Iraq's average production for February was 2.4 million barrels per day and exports averaged 1.93 million barrels per day.