A DEAL to end the bloody three-week confrontation in Najaf was clinched last night after Iraq’s most revered Shia cleric led hundreds of thousands of followers to the holy city in an awesome display of people power.

As Shia multitudes converged on Najaf, Grand Ayatollah Ali al-Sistani held face-to-face negotiations with the rebel cleric Hojatoleslam Moqtada al-Sadr, culminating in the announcement at midnight of a breakthrough.

Speaking at the Ayatollah’s villa on the edge of Najaf, aides said that no serious problems remained.

“You will hear very good news within a few hours, and the Government will announce officially their agreement to all the conditions put by all sides,” Hamid al-Khaffaf, Ayatollah al-Sistani’s spokesman, said.

If the deal holds, Hojatoleslam al-Sadr’s Mahdi Army will lay down its weapons and leave the golden-domed Imam Ali shrine, where it has been fighting US troops since the beginning of the month. In Baghdad, the Iraqi Government gave its blessing to the agreement, raising hopes that Hojatoleslam al-Sadr's militia will start leaving the shrine today.

That would come as a huge relief for the governments of Iraq, the US and Britain. The longer the confrontation has lasted, the more it has undermined the authority of Iyad Allawi, Iraq’s interim Prime Minister, boosted the stature of Hojatoleslam al-Sadr and raised the spectre of US and Iraqi forces having to storm a shrine revered by Shia Muslims around the world.

The deal would re-establish Ayatollah al-Sistani as undisputed head of Iraq’s Shia majority after Hojatoleslam al-Sadr’s apparent attempt to seize his mantle.

The Government promised not to arrest Hojatoleslam al-Sadr. “He is as free as any Iraqi citizen to do whatever he likes,” Kasim Daoud, the Minister of State, said.

The breakthrough came at the end of a day of intense drama and violence that left at least 74 Iraqis dead and 315 wounded. Vast throngs of Shias heeded Ayatollah alSistani’s call to march on Najaf to demand the end of an uprising that has left hundreds dead. There were moments when his adventure teetered on the brink of disaster.

A mortar attack on the mosque in the adjacent city of Kufa killed 25 followers of Hojatoleslam al-Sadr. Soon afterwards, at least 20 Shia marchers in Kufa were killed by gunfire. It was unclear who was responsible.

At 3pm, Ayatollah al-Sistani, who flew back from medical treatment in London on Wednesday, arrived from Basra in a motorcade escorted by dozens of police vehicles.

The reclusive septuagenarian cleric drove into Najaf past multitudes of supporters and a giant cavalcade of cars, buses and lorries that jammed roads from all points of the compass.

He went straight to his villa on the edge of the city. As he slept after his long journey, the interim Iraqi Government and the US military declared a 24-hour ceasefire after three weeks of intensifying warfare.

Ayatollah al-Sistani then received Hojatoleslam al-Sadr at his villa for talks. His plan was said to entail the removal of all weapons from Najaf, the withdrawal of all foreign forces, leaving security to the police and compensation for those harmed by the fighting.

Iyad Allawi, Iraq’s interim Prime Minister, offered the rebels an amnesty if they laid down their weapons and left the shrine.

“The Iraqi Government will provide (the rebels) with ways to hand in their weapons and leave the sacred shrine and we affirm again that we will provide safe passaged to Sayyed Moqtada al-Sadr if he chooses to stop the military confrontation,” Dr Allawi said.

As the talks progressed, thousands of the Ayatollah’s supporters evaded police efforts to keep them out of the city and marched towards the shrine. Police suspected correctly that Mahdi Army supporters would infiltrate the crowd, knowing it would prove the easiest way to slip behind US forces still besieging Mahdi fighters around the shrine.

Suddenly a handful of shots rang out. Two witnesses confirmed that they came from suspected Mahdi gunmen in the crowd. Then mayhem erupted, with police opening fire with machineguns mounted on police cars sitting at a nearby junction. Heavy fire raked the sky and road.

The Times sheltered behind a concrete balustrade for ten minutes as the bullets flew, then sprinted from the area.

One man slumped down, his loose-fiting tunic covered in blood around the groin. Frantically searching for the wound, he screamed “I’ve been hit. I’ve been hit”, until he was reassured that the copious amount of blood belonged to somebody else.

“The police are shooting. Why? We are not armed. They are simple people,” another man shouted.

Late last night, journalists were summoned to Ayatollah al-Sistani’s villa to be told of the deal. The Ayatollah himself did not appear but his spokesman, Mr al-Khaffaf, broke the news.

“The meeting was a positive one and they managed to reach agreement. By tomorrow morning there will be no signs of armed people in the holy shrine and this will all be solved,” he said.

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