NAJAF, Iraq — Radical cleric Muqtada al-Sadr ordered his fighters Thursday to hand control of a revered Najaf shrine to top Shiite religious authorities, hours after U.S. forces bombed militant positions and Iraq's prime minister made a "final call" for the cleric's militia to surrender.

Blasts and gunbattles persisted throughout the day Thursday in the streets of Najaf, where militants bombarded a police station with mortar rounds, killing seven police and injuring 35 others. At night, at least 30 explosions shook the Old City as a U.S. plane hit militant targets east of the Imam Ali shrine.

U.S. forces also battled al-Sadr's supporters in a Baghdad slum, where militants said five fighters and five civilians were killed. Also, late Thursday, an American warplane bombed targets in the Sunni city of Fallujah, 40 miles west of Baghdad.

Insurgents fired back mortars toward a U.S. base as calls of "God is Great" and Quranic verses blared from the loudspeakers of Fallujah's mosques. U.S. forces have routinely bombed targets in the city it says are strongholds of Sunni insurgents believed responsible for violence against coalition troops, Iraqi forces and civilians.

Militants elsewhere in Iraq attacked oil facilities in the north and south, fired mortars at U.S. Embassy offices in the capital, injuring one American, and threatened to kill two hostages, a Turkish worker and a U.S. journalist.

In a speech, interim Prime Minister Ayad Allawi had warned the radical cleric to disarm his forces and withdraw from the shrine after his government threatened to send a massive Iraqi force to root them out.

Defying that ultimatum, al-Sadr sent a telephone text message vowing to seek "martyrdom or victory," and his jubilant followers inside the shrine danced and chanted.

Later in the day, a top al-Sadr aide said the cleric had ordered his militia to relinquish control of the shrine where they have been holed up for two weeks fighting Iraqi and U.S. forces. But in a letter shown by the Arab television station Al-Arabiya, al-Sadr said he would not disband his Al Mahdi Army.

Al-Sadr had said in recent days he wanted to make sure the shrine was in the custody of religious authorities, though it was unclear if the government would agree to that.

The violence in the holy city between the insurgents and a combined U.S.-Iraqi force has angered many in Iraq's Shiite majority and proven a major challenge to Allawi's fledgling interim government as it tries to build credibility and prove it is not a U.S. puppet.

Any raid to oust militants from the Imam Ali shrine — especially one that damaged the holy site — could spark a far larger Shiite uprising. Government accusations that militants have mined the shrine compound and reports that women and children were among those inside could further complicate a raid.

Some of those in the compound were "dancing and cheering," a CNN journalist reported from inside the shrine, where she was among journalists escorted there with help from the Iraqi government, the U.S. military and al-Sadr's Mahdi Army.

"They are all very proud to be in here and seem to be very adamant about staying in here," CNN reporter Kianne Sadeq said. "They aren't going anywhere until the fighting is over."

In the impoverished Baghdad neighborhood of Sadr City — named for the cleric's late father — U.S. tanks moved throughout the streets and helicopter gunships shot at al-Sadr militants from the skies. The militants claimed five fighters and five civilians were killed.

There was no certainty that the latest offer from al-Sadr to withdraw would be implemented, as both sides appeared to be engaged in brinkmanship.

Thursday's violence came a day after al-Sadr had accepted an Iraqi delegation's peace plan for Najaf, demanding he disarm his militia, leave the shrine and turn to politics in exchange for amnesty. But he continued to attach conditions the government rejected, and fighting persisted.

Reiterating his government's refusal to negotiate with the armed militants, Allawi had called on al-Sadr to personally accept the government's demands to end the Najaf fighting — not through aides or letters as he has been communicating so far.

"When we hear from him and that he is committed to execute these conditions we will ... give him and his group protection," the prime minister said in a Baghdad news conference.

In Washington, the Bush administration said al-Sadr needed to match words with deeds. "We have seen many, many times al-Sadr assume or say he is going to accept certain terms and then it turns out not to be the case," said National Security Adviser Condoleezza Rice.

Other Muslim countries, including Shiite Iran, have appealed to the Iraqi government to seek a peaceful solution, and the Arab League chief on Thursday called for an immediate end to military operations in Najaf and said Iraqi civilians must be spared.

Secretary-General Amr Moussa received news of artillery "shelling and renewed clashes (in Najaf) with great uneasiness," Arab League spokesman Hossam Zaki said in a statement faxed to The Associated Press.

An al-Sadr representative in Baghdad, Abdel-Hadi al-Darraji, warned that fighting in Najaf could "ignite a revolution all over Iraq."

"We welcome any initiative to stop the bloodbath in Najaf," he told Al-Arabiya television. "Otherwise the battle will move to Baghdad, Amarah, Basra and anywhere in Iraq."

Hoping to undermine efforts to stabilize and rebuild after the ousting of Saddam Hussein, militants have frequently attacked Iraq's essential oil industry. Al-Sadr fighters on Thursday broke into the headquarters of Iraq's South Oil Co. near the southern city of Basra and set the company's warehouses and offices on fire, witnesses said.

A separate attack near the northern city of Kirkuk killed an Iraqi security officer working for the state-run Northern Oil Co. and injured two others, police said.