NAJAF, Iraq - A tentative cease-fire held in the holy city of Najaf on Saturday while envoys of radical cleric Muqtada al-Sadr negotiated with Iraq's interim government to end fighting that has become a key test of the country's new leaders.

But al-Sadr appeared in no mood for compromise with the government or the U.S. troops his Mahdi Army militiamen have battled for nine days. In a speech from Najaf's revered Imam Ali shrine, where he is holed up with his loyalists, he exhorted his men to keep fighting elsewhere in Iraq.

"We have gotten rid of Saddam, (now) we have those who are worse than Saddam," he said Friday night. "Maybe there is a truce for a day or two. Oh brothers in the rest of the provinces, continue your jihad, maybe it (the government) wants to silence the sound of truth so don't let it."

Sadr spoke with a bandage around his right hand. Aides said he had suffered light shrapnel wounds Friday as he met with his followers near the shrine.

The violence in Najaf has spread to other Shiite areas in Iraq and become a crucial test to the interim government that took power at the end of June. While U.S. troops have done much of the fighting, they are not taking part in the cease-fire talks.

Iraqis held demonstrations Friday in support of al-Sadr in cities across the country. In Baghdad, thousands of protesters, including some police officers, gathered outside the fortified enclave housing the U.S. Embassy and government offices and prayed in the street.

But for now, Najaf, the center of the crisis, was quiet a day after the United States suspended a major offensive. U.S. tanks were seen pulling back from some streets, and no U.S. or Iraqi forces were visible in the city center. The U.S. military said it was maintaining a loose cordon around the Old City, the cemetery and the Imam Ali Shrine.

"We've seen no violations of the cease fire since 7:30 a.m. yesterday," Maj. Doug Ollivant said. "That's good - it shows somebody has control over them. We weren't sure before."

On Saturday, the military said two U.S. servicemen were killed in separate incidents in Iraq on Friday. A Marine was killed in action while the soldier, assigned to I Marine Expeditionary Force, died from wounds received during fighting in Anbar province, while "conducting security and stability operations," the military said.

Since May 1, 2003, when President Bush declared that major combat operations in Iraq had ended, 794 U.S. soldiers have died - 585 as a result of hostile action and 209 of non-hostile causes, according to the Defense Department.

Thousands of Iraqis began streaming into Najaf on Saturday, after leaving their towns and cities the day before on a march to support al-Sadr. At least 1,000 people gathered outside the cleric's local office in Basra, readying to leave for Najaf later Saturday.

Aides to al-Sadr told Iraqi negotiators that the cleric was prepared to disarm his followers, but wants an American withdrawal from the holy city and amnesty for all his fighters.

In Washington, U.S. Secretary of State Colin Powell

denounced al-Sadr and his militia as outlaws and said U.S. forces were "squeezing" the city in an effort to end the fighting.