Iraqi forces were firing on coalition troops from inside the Mosque of Ali, one of the world's most important Shiite Muslim shrines, U.S. Central Command said Wednesday.

Brig. Gen. Vincent Brooks called the Iraqi fire from inside the gold-domed mosque in Najaf "a detestable example of putting historical sites in danger" and said U.S.-led forces refused to return fire.

Allied troops occupied part of the city Wednesday and were welcomed by a crowd of cheering Iraqi civilians, according to a Washington Post reporter traveling with U.S. forces.

The Air Force demolished a building described as a Baath Party headquarters with a 2,000-pound bomb Wednesday, and U.S. patrols in the city traded gunfire with Iraqis, the Post report said.

But soldiers were still trying to root out Iraqi fighters in the holy cities of Najaf and Karbala without damaging their sacred buildings. The coalition has declared the holy sites "no target" zones that can only be fired on in self-defense, Brooks said during a briefing at U.S. Central Command in Qatar.

"We don't have to go to that mosque and we certainly want to keep it as protected as possible," he said. "It's something we know to be sacred, and something obviously the people of the town know to be sacred."

The Ali Mosque holds the tomb of the Shiites' most revered saint, Imam Ali Ibn Abu Talib, the Prophet Muhammad's cousin and son-in-law. With its silver-covered tomb, ceramic-ornamented walls and resplendent golden dome and minarets, the shrine is considered a treasure of Islamic art.

Attacking such holy sites would alienate Iraq's majority Shiite population -- whose support the coalition has been trying to rally -- and inflame Shiite feelings against the United States worldwide, particularly in Iran. There have been concerns that Saddam Hussein's Sunni Muslim regime would try to provoke allied forces to attack holy sites.

Central Command also said Iraqi forces fired three unguided surface-to-surface rockets that landed near Najaf on Wednesday. The unguided rockets used are known as Free Rocket Over Ground, or FROGs.

Video was shown at the briefing of Iraqi troops positioning two tanks on transporters next to another mosque. Brooks said a third truck carried a container that exploded, but there were no U.S. warplanes or other weapons in the area that could have caused the blast.

British Prime Minister Tony Blair said Wednesday there was evidence that Iraq itself may be planning to damage the shrines, and then blame the coalition.

"We are doing everything we can to protect those holy sites and shrines," Blair said.

In Baghdad, Iraqi Information Minister Mohammed Saeed al-Sahhaf said his government was also concerned about possible damage to historical and cultural sites.

For the world's nearly 120 million Shiites, Najaf is the third holiest city, behind Mecca and Medina in Saudi Arabia.

Najaf, whose name in Arabic means "a high land," is located about 100 miles south of Baghdad on a high desert plateau overlooking the world's largest cemetery, where Shiites aspire to bury their dead.

Najaf is also the seat of the Shiites' spiritual leaders, known as ayatollahs, and the center for scientific, literary and theological studies for the Islamic world.

Karbala, about 40 miles to the north, is the burial place of Imam Hussein, Ali's son, who was killed in a battle with the army of the Muslim Sunni Omayad Caliph Yazid in 680. Hussein's tragic death is memorialized by Shiites for its historical importance and its symbolic significance -- as a struggle between justice and injustice.

The city, which is surrounded by date palm groves, overlooks a sandy expanse next to the Euphrates River.

The holy shrines in both cities are believed to have been built by Persian kings who filled them with priceless objects and gifts. They suffered heavy damage when Saddam's government put down a Shiite rebellion after the 1991 Gulf War, but they have since been restored.