Moqtada Sadr demands a ceasefire before leaving the Imam Ali Mosque

Moqtada Sadr will disarm his militia and leave a holy shrine following a ceasefire, an aide to the radical Shiite Muslim cleric said, hours after Iraq's defence minister threatened to crush his rebellion.

The shock announcement came after Sadr refused to meet delegates from Iraq's national conference who had braved fierce fighting to journey to the shrine of Imam Ali in the central city of Najaf, informed Channel News Asia.

Senior aide said on Wednesday that Sadr had demanded a ceasefire first with U.S.-led forces in Najaf before disarming his Mehdi militia and leaving the Imam Ali Mosque.

Explosions and gun fire still echoed around the mosque hours after the announcement that Sadr had agreed to end a rebellion that has posed the biggest challenge to Prime Minister Iyad Allawi since he took over from U.S.-led occupiers on June 28.

"Sayyed Moqtada and his fighters are ready to throw down their weapons and leave for the sake of Iraq," Ali al-Yassiri, Sadr's political liaison officer, told Reuters. "But they should stop attacking him first and pull away from the shrine."

Al-Sadr's supporters, who began an uprising in Najaf and other southern cities on Aug. 5, have clashed with Iraqi and U.S.- led coalition forces, and hundreds of people have been killed, according to the Health Ministry and the U.S. military.

The government has plans for ``liquidating'' al-Sadr, Ali al- Lami, an official of Hezbollah, a Shiite group based in southern Iraq that has been involved in talks with Sadr, said, according to Reuters.

Aljazeera says that earlier, US troops backed by helicopter gunships pounded parts of Najaf's historic Old City before al-Shaalan offered rebels a last chance to surrender or be crushed.

"The coming hours will be decisive and we will teach them a lesson they will never forget," al-Shaalan told reporters on a visit to Najaf, accompanied by provincial governor Adnan al-Zurfi.