Al-Sadr, who heads the country's biggest militia, the Mahdi Army, has been under intense pressure from Prime Minister Nouri al-Maliki, also a Shiite, to disband the Mahdi Army or face political isolation.
Al-Sadr's followers are eager to take part in the local elections because they believe they can take power away from rival Shiite parties in the vast, oil-rich Shiite heartland of southern Iraq.
And in a new move to stem the flow of money to armed groups, the government ordered a crackdown on militiamen controlling state-run and private gas stations, refineries and oil distribution centers.
It is believed that gas stations and distribution centers, especially in eastern Baghdad and some southern provinces, are covertly controlled by Shiite militiamen dominated by the Mahdi Army.
The failure of government forces to capture Basra despite superiority in numbers and firepower was an embarrassment to al-Maliki, who ordered the offensive and personally supervised it during the first week.
It also raised questions whether Iraq's mostly Shiite army and police can confront Shiite militias, including Iranian-backed "special groups," which the U.S. command now considers the greatest threat to Iraqi democracy with the diminishing influence of al-Qaida in Iraq.
National Security Adviser Stephen Hadley said Iran is very active in southern Iraq.
"So we have illegal militia in the southern part of the country that really are acting as criminal elements that are pressing the people down there and, in good measure, as we've seen, alienating the Iraqis from Iran," Hadley told "Fox News Sunday."
The Basra offensive - which opened on March 25 - quickly stalled amid strong resistance from the outnumbered militiamen, despite artillery and air support provided by U.S. and British forces.
During the attack more than 1,000 security troops - including a full infantry battalion - refused to fight or joined the militias, handing them weapons and vehicles.
U.S. officials have praised al-Maliki for the determination he showed in confronting the militias, but they have also said the Basra operation was hastily arranged and badly executed. Critics said it highlighted the Iraqi army's poor leadership and the low morale among its rank and file.
Washington maintains that as the Iraqi forces increase their capabilities, they will replace U.S. troops providing security in much of the country. But last week, Defense Secretary Robert Gates acknowledged that future U.S. troop withdrawals will go more slowly than had originally been hoped for.
Speaking to reporters in Basra, Interior Ministry spokesman Maj. Gen. Abdul-Karim Khalaf said the government had fired 421 policemen who have not returned to duty since fighting ended. They included 37 senior police officers ranging in rank from lieutenant colonel to brigadier general.
Khalaf said that 500 soldiers who have been absent without leave since the campaign ended on March 30 had also been dismissed and would be tried by military courts.
"Some of them were sympathetic with these lawbreakers, some refused to (go into) battle for political or national or sectarian or religious reasons," Khalaf said.
The majority of Iraqi soldiers and police are Shiites. Many of the government troops were said to have been reluctant to confront fellow Shiites in battle.
In Kut, a city 100 miles southeast of Baghdad that was also affected by the fighting, a further 400 policemen were also dismissed, said a senior police commander who asked not to be named because he is not authorized to speak to the media.
Although clashes in Basra largely petered out after al-Sadr's order on March 30 for his militiamen to stand down under a deal brokered in Iran, fighting in Baghdad has continued.
There have been daily gunbattles in Baghdad's main Shiite militia stronghold of Sadr City between militants and Iraqi and U.S. forces, which have used helicopters and unmanned drones to pound the insurgents from the air.
Fresh clashes were reported Sunday, and a salvo of rockets or mortar rounds struck the U.S.-protected Green Zone, which houses the U.S. and British embassies and much of Iraq's government in Baghdad. U.S. officials said no casualties were reported.
In Basra, security operations continued as government forces searched for illegal weapons.
Lt. Gen. Mohan al-Fireji, who commands government forces in the city, said the two-day operation had netted arms, roadside bombs and drugs.
Khalaf also said 28 criminals from Basra who were tried and been found guilty of multiple murders and abductions were executed in Baghdad on Sunday. They had been arrested before the upsurge in fighting in March and moved to the capital.
