US and Iraqi troops have killed at least 300 militants in battles around the city of Najaf, Iraqi sources say.
Officials in Iraq say 300 militants were killed in clashes on Sunday with US-backed Iraqi troops ahead of a major festival for Shia Muslims.
Fighting has continued since US-backed Iraqi army units clashed with the previously unidentified group on the northern edge of Najaf on Sunday.
Fighting near Najaf had largely ended by Monday morning, reports said, but bombings and mortar attacks elsewhere killed about 15 Shia Iraqis.
Three Iraqi soldiers were killed and 21 were injured, Iraqi sources said.
Police and troops patrolled the area and frisked residents at gunpoint.
The US military said two of its troops died when their helicopter was shot down, but did not confirm any of the Iraqi casualty figures.
A previously unknown group was blamed for Sunday's violence in which three Iraqi and two US troops also died.
Provincial officials said hundreds of militants died in the fighting, in the Zarqa district, news agencies reported.
The US military said its two personnel were killed when their helicopter was shot down, but it did not confirm any of the other casualty figures.
"They are well-equipped and they even have anti-aircraft missiles," provincial governor Asaad Abu Gilel was quoted by the Associated Press news agency as saying.
Najaf province spokesman Ahmed Deaibil says US and Iraqi forces now have the Zarqa area surrounded and had seized heavy machine guns, ammunition and other weapons.
An Iraqi official in the Najaf governor's office told the BBC that 21 Iraqi soldiers had been injured in the clashes.
There is confusion about the nature of the group, which officials are calling the Army of Heaven. Its not even known if the group is Shia or Sunni.
The BBC's world affairs correspondent Mike Wooldridge in Baghdad says as yet there is no independent confirmation of the scale of casualties in the fighting and there is still uncertainty over the identity of the group of several hundred armed men.
Security officials have said Afghans, Saudis and Sudanese were involved in the fight.
Meanwhile a Washington-based think-tank says Iraq is rapidly sliding deeper into civil war.
Provincial officials said the militants were well-equipped and had anti-aircraft missiles.
Najaf governor Asaad Abu Gilel said they had been intent on attacking Shia clerics and pilgrims marking Ashura.
The BBC's world affairs correspondent Mike Wooldridge in Baghdad says as yet there is no independent confirmation of the scale of casualties in the fighting in Najaf and there is still uncertainty over the identity of the group of several hundred armed men.
Civil war
Other violence on Monday appeared linked to Ashura, which reaches its climax on Tuesday with processions in Najaf, Karbala and other Shia shrines.
A bomb exploded near a bus carrying Shia shrine goers in northern Baghdad, killing four people.
Mortar rounds hit a Shia neighbourhood in the mainly Sunni town of Jurf al-Sakhar south of Baghdad, killing 10 people, including three children and four women.
Ashura is holiest day in the religious calendar for Shia Muslims, commemorating the 7th century death of Imam Hussein.
In the past, Shias have been hit by co-ordinated attacks as they marked Ashura with huge public gatherings.
Separately, a Washington-based think-tank says Iraq is rapidly sliding deeper into civil war.
The Brookings Institution says the fighting is likely to spill over into neighbouring countries, resulting in mass deaths, serious disruption of Gulf oil supplies and a drastic decline in US influence in the region.
The Brookings Institution says the fighting is likely to spill over into neighbouring countries, resulting in mass deaths, serious disruption of Gulf oil supplies and a drastic decline in US influence in the region.
Security tightened
The latest wave of attacks comes as Iraqi and US forces are gearing up for a security crackdown in a bid to halt the sectarian violence that is claiming hundreds of lives in Iraq every week.
Unnamed Iraqi sources said that the insurgents were from a previously unknown militant group calling themselves the Army of Heaven, or Soldiers of Heaven.
Mr Gilel said that the gunmen had been intent on attacking Shia clerics and pilgrims marking the holy festival of Ashura.
Thousands of pilgrims from across Iraq and beyond have descended on Karbala to take part in ceremonies marking the martyrdom of Imam Hussein, a grandson of the Prophet Mohammad, in 680.
In the past the festival has been hit by co-ordinated attacks, so some 10,000 Iraqi police and security forces were on duty in the city, 80km (50 miles) south of Baghdad, as part of a tightening of security.
There was no let up from the bloodshed on Sunday, as seven Iraqi children died when their schools were targeted - five in Baghdad, where a mortar hit a high school, and two in a bomb attack at a primary school in Ramadi
Pupils at the secondary school in the mainly Sunni Adil district in west Baghdad were taking a break from lessons when two mortars landed in the yard.
Five girls were killed and 20 other pupils injured as the blast blew out classroom windows, spraying the children with debris and shards of glass.
It was not clear who fired the mortars but the school is in a district which has been the scene of frequent reprisal attacks by Sunni and Shia extremists.
A primary school in Ramadi, north-west of Baghdad, was caught up in the violence when a suicide truck bomber attacked a nearby Iraqi security base.
The wave of attacks comes as Iraqi and US forces are gearing up for a security crackdown in a bid to halt the sectarian violence that is claiming hundreds of lives in Iraq every week.
