NAJAF, Aug 13: Religious scholar Moqtada al-Sadr on Friday urged Iraq's "dictatorial" interim government to resign and said he and his militia would remain in the holy city of Najaf until death or victory, his spokesman said.

The spokesman quoted Sadr as telling supporters at Imam Ali Mosque: "I advise the dictatorial, agent government to resign... the whole Iraqi people demands the resignation of the government... they replaced Saddam with a government worse than him."

"I will not leave this holy city," the spokesman quoted Sadr as telling supporters chanted "no, no to America". "We will remain here defending the holy shrines till victory or martyrdom."

An earlier report said Al Sadr was negotiating a deal to vacate Najaf as thousands of protesters across southern Iraq condemned the US offensive in the holy city. Demonstrators gathered in seven cities in Iraq to vent their anger at the assault on Sadr's forces while conflicting reports circulated about the firebrand cleric having been wounded during the fighting.

In Fallujah, US planes bombed several targets for the second day, killing six Iraqis, including two children, witnesses and hospital officials said. Another 11 people, including a child, were wounded, said Falluja Hospital director Rafeh Iyad.

Falluja residents have expressed solidarity with Sadr's anti-US militia. The US military, however, said it had no information on the attacks. In Basra, a British journalist, who was kidnapped earlier, was released on intervention of Moqtada Al Sadr's spokesman.

Moqtada Al Sadr's spokesman said the cleric would pull his forces out of Najaf if US forces also withdrew and religious authorities agreed to administer the city's sacred sites.

Sheikh Ali Smeisim also said Sadr was demanding the release of his captive fighters and an amnesty for his fighters, who, he said, should be allowed to participate in Iraq's political process.

"Sayyed Moqtada will not be touched if he leaves the shrine peacefully," Interior Minister Falah Al Naqib said. By evening, witnesses said, US soldiers had withdrawn from positions near Sadr's house in Najaf.

Sadr's spokesman Ahmad Al Shinabi said the cleric was wounded in the chest, arm and leg in the cemetery on Friday. Interior Minister Naqib denied Sadr was wounded and said a truce had been in force since the night between Thursday and Friday.

He said the government was negotiating Sadr's departure from Hazrat Ali's shrine, where he has been holed up with his fighters. Residents said Najaf was quieter than on Thursday, but there had been sporadic clashes overnight in the city.

"We have ceased offensive military operations at this time." said a US military spokesman. "There were some clashes this morning, but then the order came down to cease operations and we have," he said.

In Kufa, Iraqi security forces killed several people in a raid on a stronghold of forces loyal to Moqtada Al Sadr, US Marine Capt Carrie Batson told CNN. Thousands of Sadr supporters protested in front of the 'Green Zone' compound housing the Iraqi government and the US embassy in Baghdad. Several Iraqi police took part, holding up posters of the cleric and putting them on their vehicle windows.

In Diwaniya, one of the biggest protests was staged by enraged Iraqis who surrounded the local office of Mr Allawi's political party. Thousands also protested in Kufa, Samawa, Kirkuk, Karbala and Falluja.

The protests showed the depth of divisions in Iraq ahead of the planned start of a national conference on Sunday to choose a 100-member assembly that will oversee the interim government.

In the meantime, gunmen kidnapped a British journalist in Basra and threatening to execute him within 24 hours if US forces did not pull out of Najaf, but Sunday Telegraph reporter James Brandon was later released after Sadr intervened. Mr Brandon was handed over within hours to Sadr's Basra office. -Agencies