In the end, as many as 18 soldiers were captured after the March 8 ambush, carried out by so-called "rogue elements" of Mr. Sadr's Mahdi Army.
The US responded immediately, cutting off bridges and sealing off all the main entrances to the district as the hunt for the soldiers began.
The next day, the men were freed, but not all of them returned with their guns, newly issued US manufactured M16s that are now believed to be in the hands of an element of Sadr's militia that does not appear to be abiding by a freeze in operations ordered last August. About 10 rifles are missing.
Over the past 10 days, violence has tested the militia's period of quiet, which many say has contributed to a drop in US and Iraqi casualties, and seems to indicate deepening fissures within Sadr's powerful organization.
For the Iraqi Army, the loss of the weapons, even though only a relatively small number, is not only embarrassing but also shows how quickly the M16s, issued recently to replace inferior AK-47s, can fall into enemy hands.
Gen. Naseer al-Abadi, deputy chief of staff of Iraq's armed forces, says this is the first incident of its kind since the fall of last year, when the Army started receiving M16s as part of wider efforts to build up the capabilities of the US-trained force. So far, about 22,000 M16s have been issued to the nearly 200,000-strong army, he says.
"There is a big investigation … this is very serious," said General Abadi. "We will not tolerate anyone losing an M16." He says the soldiers are now in jail pending the investigation.
A series of violent incidents have followed the Sadr City incident in predominantly Shiite areas in the country where the Mahdi Army has great influence.
Clashes between militiamen and the police in the city of Kut, about 100 miles southeast of Baghdad, since Tuesday have left at least 13 people dead including two policemen, according to local authorities quoted by Reuters adding that nearly 70 militia members were also detained.
Abadi was not able to immediately confirm the casualty figures but says that the Iraqi Army, which did not previously have a permanent presence in the city, has now gone in to keep the peace. He says the fighting was sparked when militiamen attacked the police and seized four of their newly issued vehicles.
The spokesman for US-led coalition forces in Iraq Rear Adm. Greg Smith said US air power was involved in the fighting in Kut early on but sought to play down the significance of the clashes there and the recent unrest in the south. He portrayed the fighting in Kut as just being a turf battle between "local groups."
"It's limited in terms of scope and scale … we do not view it as a widespread issue and concern outside of Kut," Admiral Smith told reporters during a briefing in Baghdad.
The US military continues to say that Al Qaeda is the No. 1 threat in Iraq, and Smith highlighted this Sunday by speaking about a group of 48 fighters that have been detained by US troops over the past four months. He said all came over the Syrian border to carry out suicide attacks in Iraq. He said their average age was 22 and that 40 percent were Saudi.
But a pattern of violence in southern Iraq over the past week highlights another threat, too.
Four American soldiers were killed in two separate attacks in southern Iraq Wednesday, a day after a powerful roadside bomb, similar to those Washington accuses Iran of shipping to Iraq, struck a bus near the southern city of Nasiriyah, killing 16 civilians. On Saturday, 29 Katyusha rockets aimed at the US consulate in Hilla, south of Baghdad, hit a residential neighborhood instead, wounding nine.
Abadi voiced concern that there may be confusion at the moment among many rank-and-file Mahdi Army members as to whether the freeze ordered by Sadr was still on. This confusion may be prompting some to "carry out retaliatory attacks against Iraqi security forces."
Abadi says the militiamen appear to want revenge for the relentless raids and arrests carried out by the US and Iraqi forces against many elements of the Mahdi Army.
Sheikh Abdul-Hadi al-Mahamadawi, a cleric and one of Sadr's top lieutenants based in Karbala, south of Baghdad, says he has been instructed personally by Sadr to announce this past Friday in his prayer sermon that the freeze was still on.
"Otherwise lots of blood would be spilled … we continue to be intimidated beyond belief by Iraqi forces … but Sayyed [honorific] Moqtada believes it's better to be the oppressed than the oppressor," he said in a telephone interview from Karbala.
Underscoring the fissures within the Mahdi Army, Mr. Mahamadawi says the confusion about the freeze arose on March 8 when Sadr, who last appeared in public in May 2007, responded in a statement to a question from one of his followers about the legitimacy of self-defense by saying: "I sympathize with those killed while defending themselves and their loved ones during [government] raids."
Days before, Sadr issued another statement, also apparently in response to a query from a follower who complained that they "were demoralized by his long absence."
"Every leader needs to become more well rounded.… I dedicated to you and society a big part of my life to the point where I have become weaker, sicker, and more anxious. I deserve time to myself to study. Would not you rather have a more learned leader?" he said in the statement. "I have [also] withdrawn from the scene to protest against the fact Iraq remains under occupation and the disobedience of many followers."