U.S. forces stormed one of the homes of radical Shiite cleric Muqtada al-Sadr's (search) in Najaf, FOX News confirmed Thursday.

The operation came after troops raided several militia strongholds, including a private hospital and a maternity hospital. Militiamen loyal to al-Sadr fired on U.S. forces as they made their way to the cleric's home, according to a FOX producer on the ground. Marines were securing the area and there were casualties reported on the side of coalition forces.

U.S. commanders said they believe al-Sadr is holed up in the Imam Ali Shrine (search), one mile away.

The latest development was part of a new operation between U.S. and Iraqi forces to move against the cleric and his fighters.

Earlier, the coalition forces succeeded in seizing control of the city's vast cemetery, which had been a hiding place for al-Sadr's men, according to U.S. military officials.

After some hours of fighting, Iraqi Prime Minister Iyad Allawi (search) called on armed groups to drop their weapons and leave the holy shrine in Najaf (search).

"These places have never been exposed to such violations in the past," he said, adding that the violence has killed many innocent people.

"Our government calls upon all the armed groups to drop their weapons and return to society. We also call upon all the armed men to evacuate the holy shrine and not to violate its holiness."

Meanwhile, it was reported that U.S. warplanes bombed targets near al-Sadr's house in Najaf. Witnesses said plumes of black smoke billowed as the combatants exchanged heavy fire.

Assault aircraft from the U.S.S. John F. Kennedy were in the air over the city, providing close air support over a variety of targets. F-14 Tomcats and F/A 18 Hornets were also seen in the air over Najaf.

Military sources cautioned reporters that the action in Najaf (search ) was not the "major offensive" that had been discussed on Wednesday, but just one in a series of raids aimed at breaking al-Sadr's hold on the city and drawing his loyalists out.

"Major operations to destroy the militia have begun," said U.S. Marine Maj. David Holahan, executive officer of the 1st Battalion, 4th Marines Regiment (search). He said thousands of U.S. troops were taking part.

"Today's operations are designed to restrict freedom of movement of Sadr forces in Kufa and Najaf and to further isolate them in these mosques which they use as a base of operations. Militia use of these shrines as protective shields could lead to damage of these sacred sites," read a U.S. military statement.

By Thursday afternoon, five civilians were killed, according to Nabil Mohammed, a health worker in Najaf. Two soldiers were injured when hit by a mortar shell while standing in an intersection of the cemetery, the military said.

"It's pretty standard — they'd push up here, fire off a few rounds, fire RPGs, then leave," said Capt. Patrick McFall.

The Shiite rebel militia's last stand may take place at the holy city's shrine. U.S. military officials estimated 750 to 1,500 members of al-Sadr's Mahdi Army (search) had barricaded themselves inside the building, which may be the locale of the coalition's major raid soon enough. U.S. officials say they will take pains to not damage the holy sites.

American soldiers will not lead the offensive to take control of the shrine, U.S. military sources said. Instead, Iraqi units will go in first, in an attempt to minimize offense to Iraq's Shiite majority.

"Today's operations are designed to restrict freedom of movement of Sadr forces in [nearby] Kufa and Najaf and to further isolate them in these mosques which they use as a base of operations," said U.S. Brig. Gen. Erv Lessel.

U.S. commanders say Allawi would have to approve any operation at the shrine itself.

"There are instructions that the Iraqi forces and the Iraqi national guard only will enter the compound and secure it, so ordinary citizens can go back and pray at this shrine," Interior Ministry spokesman Sabah Kadhim said.

The coalition forces are trying to crush the uprising led by al-Sadr, whose fighters have been battling U.S. troops in Shiite strongholds across Iraq for a week.

Hundreds of people have fled in the last few days, moving in with relatives and friends in quieter neighborhoods, or out of Najaf entirely.

Fighting Continues in Kut

Also Thursday, officials said attacks by insurgents and Mahdi militants on government buildings and police stations in the southern city of Kut have killed at least 70 people, all of them Iraqi.

Iraqi forces fought off the militants who targeted the city hall, police stations and Iraqi National Guard barracks, the U.S. military said, causing casualties on both sides.

"Seventy-two people were killed and 148 injured in clashes in the last 24 hours," said Falah al-Bairaman, director-general of health for Wasit, the province of which Kut is the capital city.

Iraq's health ministry said 75 were killed in Wednesday's fighting in Kut, 100 miles southeast of Baghdad.

The United States had announced its plan for the offensive Wednesday, and in response, al-Sadr loyalists in the southern city of Basra threatened to blow up the oil pipelines and port infrastructure there.

A similar threat Monday caused oil officials to briefly stop pumping from the southern oil wells.

The U.S. military has estimated that hundreds of insurgents have been killed in the Najaf fighting, but the militants dispute the figure. Five U.S. soldiers have been killed, along with about 20 Iraqi servicemen.

"We're starting to put the pressure on the militia to fight, die, or capitulate," Lt. Col. Myles Miyamasu, from the U.S. Army's 1st Battalion, 5th Regiment of the 1st Cavalry Division, said Thursday.

Jawdat Kadhem al-Qureishi, a member of Najaf's city council, resigned in protest of the offensive, he said Thursday.

"I announce my resignation to denounce and condemn the terrorist acts and the shelling that the city of Najaf and the Imam Ali Shrine have been subjected to," he said. "I condemn all the terrorist acts that the U.S. forces have committed."

Earlier, Najaf Gov. Adnan al-Zurufi, who has been a staunch supporter of U.S. forces here, claimed al-Qureishi resigned because kidnappers had snatched his father and demanded he step down in return for his release. Al-Qureishi did not comment on al-Zurufi's report.

Al-Zurufi later said city council members were working to defuse the crisis — though efforts to negotiate an end to the violence over the past week had failed and it appeared unlikely that any new one would succeed.

"I cannot give details about this initiative and we hope that this crisis is solved in the coming days. The situation is unbearable in the city and the militiamen should leave," he said.

The fighting forced hundreds of people to flee.

"We have put up with hunger, electricity outages and lack of water, but we cannot put up with death," said Aqil Zwein, 42.

Elsewhere, two U.S. Marines were killed when a CH-53 helicopter crashed landed in the volatile Anbar province west of Baghdad, the military said Thursday. Three other people were injured in the crash Wednesday night. The military said that no enemy fire was observed at the time.

Al-Sadr's fighters have been battling coalition forces since Aug. 5 in a resurgence of a spring uprising that had been dormant for two months following a series of truces.

The top health official in Najaf, Falah al-Mahani, said the deteriorating security situation was causing "a real catastrophe" for the health services.

"Ambulances are prevented from reaching the injured people by the clashing parties. Our staff are not able to reach their hospitals. We are paralyzed," he said, adding that the fighting injured 18 members of his staff.

FOX News' John Cookson, Bret Baier, Tadek Markowski and The Associated Press contributed to this report.