War-weary Iraqis returned to devastated offices and shops in the holy city of Najaf (search) on Saturday after three weeks of clashes as U.S. forces monitored a fragile cease-fire, but violence persisted in Baghdad, killing at least five people.

Dozens of municipal workers were out for the first time in weeks, sweeping debris off roads lined with battle-scarred buildings from which U.S. bombs had torn huge chunks.

Calm settled over the city a day after militants loyal to rebel Shiite cleric Muqtada al-Sadr (search) filed out of the revered Imam Ali Shrine and turned over the keys to Iraq's top Shiite cleric, symbolizing their acceptance of a peace deal to end a standoff with a combined U.S.-Iraqi force.

Battles between Shiite militants and U.S. forces in an al-Sadr stronghold in Baghdad, however, left three dead and 25 injured on Saturday, officials said.

U.S. soldiers in Humvees drove through the troubled Sadr City slum with loudspeakers, demanding people stay home because coalition forces were "cleaning the area of armed men," according to an Associated Press reporter at the scene. Sporadic gunfire could be heard.

Saad al-Amili, a Health Ministry official, said three people were killed and 25 were wounded in the skirmishes.

Militants fired assault rifles and rocket-propelled grenades at American troops patrolling the area, said U.S. Capt. Brian O'Malley of the 1st Brigade Combat Team, adding U.S. forces suffered no casualties.

Guerrillas also fired a barrage of mortar rounds into eastern Baghdad on Saturday, killing two civilians and wounding six others, officials said, in explosions that could be heard across the capital.

Interior Ministry spokesman Col. Adnan Abdul-Rahman said two people washing cars in a street near the former Iraqi National Olympic Committee building died in the explosions.

At least six other people were injured in the attacks, said Bashir Mohammed of Baghdad's al-Kindi hospital.

Witnesses said at least four mortars landed within an hour in the same area on Palestine street, a main Baghdad thoroughfare, as cars were driving by. Panicked people on the street were seen running for safety.

U.S. forces had pulled back from Najaf's Imam Ali Shrine (search) and the Old City around it by Saturday but maintained positions in the rest of the city, 100 miles south of Baghdad.

"Today, the Najafis can sleep well," Hamed al-Khafaf, an aide to Grand Ayatollah Ali al-Sistani, told Al-Arabiya television late Friday.

Police Lt. Qusai Mohammed said Iraqi security forces searched the main mosque in the nearby city of Kufa late Friday and found a cache of weapons hidden there.

The peace plan, presented by al-Sistani on Thursday and accepted by the Iraqi government and al-Sadr, calls for the cities of Najaf and Kufa to be declared weapons-free, for all foreign forces to withdraw from Najaf and leave police in charge of security and for the government to compensate those harmed by the fighting.

Dozens of al-Sadr loyalists piled their Kalashnikov rifles in front of the firebrand cleric's office, but thousands of others were believed to be still armed, and some were seen pushing carts full of machine-guns and rocket launchers through a narrow alley.

The plan allowed al-Sistani, the most revered Shiite cleric in Iraq, to exercise his considerable authority and prove that he could succeed where other peace emissaries had failed. It gave the interim government control of the city, disentangled U.S. forces from the persistent violence here and let al-Sadr and his militants walk away free.

But it also allowed al-Sadr to keep his militia, which fought with U.S. forces here in the spring and could take up arms again.

A U.S. defense official, speaking on the condition of anonymity, said the U.S. military is wary of any agreements in Najaf because al-Sadr's militia has used previous breaks in fighting to regroup and rearm.

But the White House welcomed the agreement, though it cautioned that the administration was not aware of all the details.

"We welcome these steps to resolve the situation surrounding the shrine of Ali without further violence and we support the efforts of the Iraqi government to make sure that the rule of law applies throughout the country," White House spokesman Scott McClellan said.

U.S. forces will remain in their current positions to ensure the cease-fire is implemented, said Capt. Carrie C. Batson, a spokeswoman for the 11th Marine Expeditionary Unit, which is responsible for the area.

Meanwhile, in the volatile city of Fallujah, a U.S. airstrike killed three people and wounded 11 others, including a 6-year-old girl, said Dr. Abdel Rahman Ahmad, of Fallujah General Hospital. U.S. warplanes also bombed the city's industrial zone, wounding two factory guards, hospital officials said.

The military said it was targeting an anti-aircraft gun mounted on the back of a truck. Militants "attempted to fire on one of our aviation assets and we responded with missile fire," said Lt. Col. Thomas V. Johnson, a Marine spokesman.