At least two Iraqis were killed and three British soldiers were wounded in the fighting, a British military spokeswoman said.

Hundreds of Sadr's Mehdi Army militiamen armed with assault rifles and rocket-propelled grenades took over several areas of Iraq's second-biggest city and set up checkpoints on the streets.

Bursts of gunfire and explosions echoed through the city. The British military reported some exchanges of fire between soldiers and gunmen.

Also yesterday, attackers set off a bomb outside the house of a police official in the town of Habhab, 35 miles north of Baghdad. The blast killed two women and a man from the official's family, doctors said.

Sadr's top aide, Sheik Abdul-Sattar al-Bahadli, offered the rewards in response to the mistreatment and humiliation of Iraqi prisoners by US guards-- a sign that the abuse scandal at the Abu Ghraib prison was spilling over into the confrontation between US troops and Sadr's militia.

He displayed documents and photos he claimed showed three Iraqi women being raped at British-run prisons in Iraq and called on supporters to launch jihad, or holy war, against British troops in this southern city.

He promised to give $350 to anyone who captures a British soldier and $150 for killing one. He also said any Iraqi who took a female soldier could keep her as a slave or gift to himself.

Meanwhile, Sadr pointed to Abu Ghraib in a sermon he delivered at Friday prayers in Kufa before thousands of worshippers. "What sort of freedom and democracy can we expect from you (Americans) when you take such joy in torturing Iraqi prisoners?" al-Sadr said, his shoulders draped with a white coffin shroud symbolizing his readiness for martyrdom.

Sadr dismissed apologies from President Bush over the abuse at Abu Ghraib. "I tell this to Bush," Sadr said. "Your statements are not enough. They (the guards) must be punished in kind."

US officials have expressed fears that Iraqi outrage over widely published photos of Iraqis being stripped and humiliated by their guards at Abu Ghraib could fuel attacks on American or other coalition soldiers.

Secretary Donald Rumsfeld Friday remained under pressure yesterday, despite apologising for the Iraq prison abuse scandal amid warnings that the revelations could worsen.

Meanwhile, a US soldier photographed holding a naked prisoner on a leash at the Abu Ghraib prison has been charged with abusing detainees, military officials at the North Carolina base where she is stationed say.

Private Lynndie England faced four charges -- conspiring to maltreat prisoners, assaulting detainees on multiple occasions, committing acts "prejudicial to good order and discipline," and committing an indecent act, officials at Fort Bragg said in a news release.

Meanwhile, political and tribal leaders in western Iraq urged US governor Paul Bremer yesterday to free all detainees.

The leaders from the Sunni-dominated al-Anbar province, from where many detainees come, said the gesture needed to be large enough to offset the enormity of abuses which have shaken the upper reaches of the US administration.