In the colonnaded doorways of Rassul Street, several fighters of the Mahdi army had made their final stand. Their bodies lay in small groups  two here, two there, and five here. For three weeks militia loyal to the Shia cleric Moqtada al-Sadr have defied the extraordinary firepower of the US military, hiding in the network of alleys surrounding Najaf’s Imam Ali shrine. Yesterday, however, their uprising appeared to be well into the last act.

“American tanks are extremely close to the shrine. There are several bodies in the narrow alleyways around it,” Faridh Karim said yesterday, after escaping from the battle zone on his bicycle.

“The dead fighters are scattered everywhere. Some are wearing black headscarves, others just dish dash.”

He added: “They tried to attack the helicopters using Kalashnikovs and rocket propelled grenades. The helicopters just mowed them down.” From early morning two US Apache helicopter gun ships circled above Najaf’s old city. The few Mahdi army fighters left alive tried to shoot them down  sending mortars crashing out across an angry white sky.

The gunships responded mercilessly, with rasping machine gun fire.

From the shrine itself came the sound of the Qur’an, broadcast on loudspeakers, and a final, glorious message of defiance  Allah O Akbar, God is great. Its front door remained closed for most of the day. It opened only briefly to allow in steaming plates of rice  lunch for the dozens of human shields still inside.

Did Mr Karim have any sympathy for the dead? “My heart bleeds when I see Iraqis killed by Americans,” he replied.

The uprising by Moqtada al-Sadr  who has not been seen for days  has plunged Iraq’s US-backed interim government into its worst crisis so far. For days, ministers have been predicting the revolt by the Mahdi army is in its “final hours”, only to be proved wrong.

The return later today to Najaf of Iraq’s most revered Shia cleric, Grand Ayatollah Ali al-Sistani, may hasten the end of the crisis. But Ayatollah Sistani has so far refused to mediate between Mr Sadr and the interim government or to accept Mr Sadr’s offer of the shrine’s keys.

The street in which both clerics live  Rassul Street, immediately opposite the shrine  is in the middle of a war-zone, with dead Mahdi army fighters lying among shot-up drapery shops and stores selling Qur’anic literature, according to witnesses.

Yesterday, police officials in Najaf insisted that despite Ayatollah Sistani’s imminent arrival, Iraqi troops would soon seize the shrine  something only made possible because of the US military’s relentless offensive against the Mahdi army. They also announced they had arrested one of Mr Sadr’s lieutenants, Shiekh Ali Semesin, accusing him of theft.

Overnight, US tanks inched down Sadiq Street, a narrow road of hotels and cafes that lead directly to the golden-domed complex.

Nearby, a platoon of lightly armed Iraqi government soldiers waited for the order to go in. The grid of dusty alleyways to the south of the shrine was also encircled. Black smoke billowed over the old city; the explosions scattered white doves from the rooftops. “The Americans are crusaders. The democracy they have brought us is the democracy of the bullet,” Fadhil Hussein, who lives in Najaf’s devastated old city, said.

Mr Hussein said that an American sniper had shot dead one of his neighbours three days ago, while he was sitting on his roof. “His body is still in the white building over there,” he said. “It is smelling very badly. The whole alley smells. Nobody dares to fetch it. They are afraid the Americans will shoot them as well.” Mr Hussein said he had gone to check on his house only to discover it had been looted.

Mahdi army fighters had taken over several abandoned houses nearby; five out of six homes in the next street had been destroyed, he said.

Conditions inside the old city were now unbearable, another resident, Fleiyeh Haasan, added. “We didn’t sleep last night due to the fighting. I have four kids. They spent the whole night crying,” he said.

But opinions over the Mahdi army’s last stand are divided  with many in Najaf dismissing Mr Sadr’s supporters as both outsiders, including volunteers from Falluja, and thugs.

“We suffered for 35 years under Saddam Hussein. He killed our clerics. He killed our poets. He killed our writers,” Kadhim Abdul Karim said, as US tanks and Humvees rattled past his street. “All our intellectuals left Iraq and our doctors left the country as well.

“Whatever happens next we want the Americans to stay. We are typical Iraqis. Moqtada and his supporters are the Taliban of Najaf. You in the west have to understand this. We don’t want them.”

Mr Karim said his brother, Zuheir, had been killed three days ago by a stray bullet while sleeping in the entrance of his house.

As dusk fell, Najaf’s old city continued to burn. “The police are Iraqis and the Mahdi army are Iraqis. Iraqis should not be fighting Iraqis,” Abu Haider, who had also fled the old city, said.

Asked how the battle was going, Commander Abu Mohammad Hilu showed off his latest trophy – a blood-drenched American boot. There was a large bullet hole in the middle. “We found it after last night’s battle,” the commander explained. His colleague, Abu Ali, added: “Originally there was an American foot inside it and a bit of the leg. But we took it out and threw it to the dogs.” But the most tangible evidence of the Mahdi army’s extraordinary self-confidence yesterday, however, came too close for comfort half an hour earlier. We had been driving through the high street in Kufa, another stronghold of the Shia cleric Muqtada Sadr, some three kilometres from the shrine where he and his supporters are still holed up.