NAJAF, June 16: Radical Shia leader Moqtada Sadr on Wednesday told members of his armed militia who do not live in this holy city to go home, in a key step toward peace in Najaf after fierce clashes with US troops.

The announcement came a day after Iraq's new president Sheikh Ghazi al Yawar said Moqtada Sadr could join national politics if he was found innocent of murder charges and agreed to disband his Mehdi Army militia.

"Members of the Mehdi Army who have agreed to make sacrifices ... are asked to return to their regions" of origin, said a brief statement from the cleric published in Najaf, 160 kilometres south of Baghdad.

In a letter made public on May 27, which helped to forge a truce between Sadr's followers and the US military, the young Shia leader said he accepted the principle of sending home those of his men who were not Najaf residents.

Prior to the release of the latest statement, a representative of senior Shia scholar and politician Mohammed Bahr al Ulum said an agreement had been struck overnight on returning Iraqi police to the city.

"We arrived at an agreement on deploying police forces to Najaf, which gives the forces of law and order the right to arrest anyone who breaks the law," said the representative, Ali Ghrifi.

According to Ghrifi, the deal was struck at a meeting of representatives of the "Shia House", which groups the leaders of Iraq's majority Shia population and has been closely involved in mediating between Sadr and the US army.

But a Sadr spokesman said allowing Iraqi police to restart full duties in the city centre depended upon Najaf's senior clerics, the Marjayah. "Whether or not to allow Iraqi police to enter the holy city is something related to the situation at the holy shrine," said the spokesman, Sheikh Qais al-Khazali, referring to the Imam Ali mausoleum, one of Shia Islam's holiest shrines, which is under the control of Sadr's men.

"It is up to the Marjayah either to allow police in or to assign special squads to guard the holy shrine," he said. On Monday, one of the Shia negotiators indicated that the future of the Mehdi Army was under discussion, after a high-level meeting in Baghdad. -AFP