Heavy fighting is reported in Najaf, close to the Shi'ite mosque which is at the centre of a two-week old rebellion by supporters of the radical Shi'te cleric Moqtada al-Sadr.
Militia leaders in the Iraqi city of Najaf have said outer walls of the Imam Ali shrine have been damaged in a series of heavy attacks by US forces.
Televised pictures have shown the damage to an outer wall of the compound around the Imam Ali mosque.
The US military has denied damaging the shrine.
US warplanes and helicopters have conducted heavy attacks on rebels loyal to the radical Shi'ite cleric, while snipers were employed on the ground.
Witnesses said white flashes illuminated the sky on the northern edge of the holy city.
Earlier, US tanks advanced to within half-a-mile of the shrine and fired at positions held by the militiamen.
The World Islamic League has said hopes of restoring peace in Najaf would fade if the stand-off between militants and US troops continues.
13 Nepalese workers taken hostage in Iraq
The Nepalese government has confirmed that 13 Nepalese workers have been taken hostage in Iraq.
The Nepalese Minister of State for Foreign Affairs, Prakash Sharan Mahat, said that the government was trying to secure their release.
Pictures of the men have appeared on the website of the Army of Ansar al-Sunna militant group. It says they were captured last week.
Mr Mahat said his government had appealed to the kidnappers through the Al-Jazeera television network in the Middle East.
The Jordan-based services company employing the Nepalese men confirmed they were missing, although it put the figure at 12.
