Women and children with the fighters of the Soldiers of Heaven outside Najaf were believed to be among those killed after coming under sustained fire from warplanes, helicopter gunships and tanks.
The cult’s leader, who claimed to be the Mahdi, a messiah-like figure who Muslims believe will right injustices in the world, was said to have died in the battle, which lasted 24 hours.
Iraqi officials said 300 were killed with 200 more wounded or captured.
Many of the fighters wore headbands declaring themselves Soldiers of Heaven.
Iraqi authorities claim they were planning to massacre clerics as hundreds of thousands of pilgrims massed in the Shi’ite holy city to commemorate Ashura, which marks the death in battle of Mohammad’s grandson in 680.
(Article continues below this ad)
Many Muslims believe the Mahdi will return to lead a battle in Najaf against the descendants of Mohammad’s arch-enemy.
Few details of the fighting 100 miles south of Baghdad were being released last night as ‘mopping-up’ operations continued.
Two Americans died when their helicopter was shot down while ten Iraqi soldiers and police were also killed.
The battle is one of the strangest since Saddam Hussein was ousted four years ago with hundreds of fighters, both Sunni and Shia, apparently prepared to sacrifice themselves.
Iraq’s national security minister Shirwan al-Waeli said the cult’s leader had been Mahdi bin Ali bin Ali bin Abi Taleb, who claimed to be the Mahdi, or hidden Imam, a descendant of the Prophet Mohammad.
The last of the 12 Shi’ite imams, Mohammed al-Mahdi disappeared as a child in the year 941, and some Muslims believe that he will one day return as a saviour of mankind.
One of the signs of the coming of the Mahdi was to be the killing of the clerics in Najaf, Waeli said.
“Ideologically, this group tries to use a sacred Muslim symbol who is Imam Mahdi al-Muntadar to lure more recruits,” said a government spokesman.
Intelligence operations had gone on for ten days and indicated cult members believed that if leading clerics were killed in Najaf it would be a sign the Mahdi had returned to bring peace to the region.
Their aim was to slip into the religious celebrations and kill as many clerics as possible.
The group also had leaflets saying the hidden imam was to return.
Waeli said that when police first approached the cult members’ camp to tell the group to leave, their leader said: “I am the Mahdi and I want you to join me.”
Fearing an attack on pilgrims and clerics, Iraqi soldiers, backed by US air power, attacked at dawn on Sunday.
Militants hiding in orchards fought back with automatic weapons, sniper rifles and rockets.
Former Saddam loyalists and foreign fighters were said to be among them.
The US military officially handed over responsibility for Najaf province to Iraqi security forces last month, withdrawing most American troops, who were to be recalled only to help in emergencies.
Meanwhile, mortar rounds rained down on a Shi’ite neighborhood in the Sunnidominated town of Jurf al-Sakhar, 40 miles south of Baghdad yesterday, killing ten, including three children and four women.
The strike came a day after mortar shells hit the courtyard of a girls’ school in a mostly Sunni Arab neighborhood of Baghdad, killing five pupils and wounding 20.
A parked car bomb also struck a bus carrying Shi’ites to a holy shrine in northern Baghdad, killing at least four and wounding six.