The US military have freed a top aide to the Iraqi rebel cleric Moqtada al-Sadr, according to reports today.
The gesture could help the interim government's efforts to calm rebel-held strongholds before elections due in January.
Moayad al-Khazraji, detained nearly a year ago along with other Shi'ite clerics close to Sadr, telephoned a colleague, Sheikh Mahmoud Sudani, after he got out of jail.
"He was released this morning," Sudani told reporters. No US comment was immediately available.
Soon afterwards a loud explosion was heard in central Baghdad, near the heavily fortified 'Green Zone' which houses Iraqi government offices and the US embassy.
The Interior Ministry and the US military had no immediate word on the cause of the blast. All entrances to the Green Zone have been closed in response.
The Green Zone, a sprawling compound on the west bank of the Tigris river, has been a frequent target for insurgents using car bombs, rockets and mortars to attack US forces and Iraq 's US-backed interim government.
Sadr, according to his aides, has demanded the release of his senior followers as one condition for a deal that would allow Iraqi security forces to take control of Sadr City, a volatile township of 2 million in north-eastern Baghdad.
Interim Prime Minister Iyad Allawi insists that Sadr's Mehdi Army militia give up its weapons and get off the streets. Both sides today they had reached no agreement.
Talks have also been under way to defuse Iraq's most stubborn troublespot, Falluja, and the Sunni Muslim city's chief negotiator said they could bear fruit soon.
A US soldier died after an attack on a convoy near Falluja yesterday. Two others were wounded. The US military said an American soldier was killed and an Iraqi translator wounded in a separate attack near Baiji, north of Baghdad, at midnight.
The soldier's death takes to at least 809 the number of US military personnel killed in action in the Iraq conflict.
US and Iraqi officials say Falluja is a key base for foreign Islamist militants such as Jordanian Abu Musab al-Zarqawi. Frequent US air strikes have targeted suspected safe houses of Zarqawi, for whom Washington has offered a $25 million reward.