NAJAF, Iraq - Followers loyal to radical Shiite cleric Muqtada al-Sadr said today they were prepared to hand control of the revered Imam Ali Shrine to top Shiite religious authorities, and Iraq's interim prime minister said he would not storm the holy site.

The moves came after a day and night of fighting in Najaf that killed 77 people and wounded 70 others, as al-Sadr militiamen mortared a police station and U.S. warplanes carried out bombing raids.

By daylight today, however, the city south of Baghdad appeared the quietest it has in weeks.

Interim Prime Minister Ayad Allawi said a peaceful resolution was possible and backed off the threats he made a day earlier to send a massive Iraqi force into the shrine to root out militants, a move that could damage the holy site and further enrage the nation's majority Shiites.

"We are not going to attack the mosque, we are not going to attack Muqtada al-Sadr and the mosque, evidently we are not going to do this," Allawi told BBC radio. "We are not going to attack the shrines at all."

"We have extended the olive branch, the olive branch is still extended, he can take advantage of the olive branch," Allawi said. "We want a peaceful solution."

In a sermon read on his behalf in the nearby Kufa Mosque, al-Sadr said he wanted the religious authorities to take control of the Old City from his Mahdi Army, though he also called on all Muslims to rise up if the shrine is attacked.

"I call on the Arab and Islamic people: If you see the dome of the holy Imam Ali Shrine shelled, don't be lax in resisting the occupier in your countries," he said.

Al-Sadr aide Ahmed al-Shaibany said today he was on his way to the office of Grand Ayatollah Ali al-Sistani, Iraq's top Shiite Muslim cleric, to offer to present officials there with keys to the Imam Ali Shrine. If they agree - which is not a certainty - the shrine could be handed over later today, he said.

"We don't want to appease the government. ... We want to appease the Iraqi people," he said.

An aide said al-Sistani has agreed to take over holy shrine in Najaf from militants.

With peace efforts continuing, U.S. tanks were on the streets late this morning, but residents reported seeing some of the Mahdi Army militia pulling out of the Old City.

The Imam Ali Shrine compound, which had been filled with hundreds of chanting and bellicose gunmen in recent days, appeared far calmer. Video of the compound and its outskirts, shown on the Arab television station Al-Jazeera, revealed far fewer people inside and no armed men. One sandbagged gun position outside the shrine was abandoned.

U.S. forces said they were still geared up for a fight.

"We are continuing to do planning and preparations for continuous offensive operations to get Mahdi militia destroyed, to capture Muqtada al-Sadr and to turn the holy shrine back to the Iraqi people," said Lt. Col. Myles Miyamasu, of the 1st Cavalry Division.

Explosions and gunbattles raged in Najaf all day Thursday. During the night, warplanes were "clearing Muqtada militia positions" east of the shrine, U.S. Marine Capt. Carrie Batson said.

Before dawn today, U.S. forces also fired precision-guided bombs at militiamen who were firing mortars at U.S. troops in the neighboring cemetery and Old City.