US AC-130 gunships pounded positions held by Shia militiamen in the Iraqi holy city of Najaf tonight and large orange multiple flashes lit the night sky.
A large cloud of smoke was rising from an ancient cemetery where rebels loyal to radical cleric Moqtada al-Sadr have fought US troops for two weeks.
The explosions from the bombing, that went on for more than 30 minutes, were loudly heard several km (miles) away.
Earlier Iraq's government warned Sadr today he would face a military strike within hours unless he ended his uprising, disarmed his militia and quit a shrine in the city of Najaf.
But Sadr reverted to his trademark defiance after two days in which he had appeared to be willing to disarm his militia and leave Iraq's holiest Shia shrine.
Asked about the latest government demands, a senior Sadr aide and Mehdi Army commander, told reporters inside the mosque: "It is very clear that we reject them."
In Baghdad, US troops overran his stronghold in the sprawling Shia slum of Sadr City with armoured vehicles; they met little resistance.
Moqtada al-Sadr
A spokesman for Sadr said he wanted the government to send a negotiator to work out details for ending the two-week crisis, which has dented the authority of interim Prime Minister Mr Iyad Allawi, killed hundreds and rattled world oil markets.
Iraqi Minister of State Mr Kasim Daoud said in Najaf the government had exhausted all peaceful means to persuade Sadr to back down and was determined to impose a military solution unless he abandoned violence, handed in weapons and left the Imam Ali Mosque.
He said Sadr was facing his "final hours" before an attack. Mr Daoud vowed to liberate the shrine but declined to say whether the government would storm the country's holiest
Shia site, where Sadr and his Mehdi militia are holed up.
Any assault could provoke outrage among Iraq's majority Shia community, especially if US forces are involved.
Sadr said yesterday his militia forces would disarm and leave the mosque if a truce was agreed with 2,000 US marines encircling the southern city, who have attacked his militia for two weeks with warplanes, helicopter gunships and tanks.
Sadr made his apparent concession after the government threatened to storm the shrine to teach Sadr's Mehdi militia "a lesson they will never forget".
He has since refused to budge, arousing scepticism among US officials that he will back down. "I don't think we can trust al-Sadr. I think we have to see action, not just words," National Security Adviser Condoleezza Rice said on hearing of the deal.