"Iran has not been happy with Sadr and helped organize and finance a faction of the Mahdi Army that would be responsible to it directly," an official said.

Despite heavy fighting with U.S. and Iraqi forces Sadr has not appeared in public. On April 8, a statement appeared in his name that appealed to the Iraq Army not to cooperate with the U.S.-led operation in Diwaniya, Middle East Newsline reported. Many members of the Mahdi Army were said to have resettled in Diwaniya from Baghdad amid heavy fighting between U.S.-led troops and Sunni insurgents.

"You, the Iraqi army and police forces, don't walk alongside the occupiers, because they are your archenemy," the statement, which could not be confirmed, said.

Officials said Iran has helped form a Mahdi Army splinter faction of about 3,000 fighters. They said about one-third of this force was financed and trained by Iran's Islamic Revolutionary Guard Corps.

"They have been given hundreds of dollars to defect from Sadr and then given a monthly salary by Iran," the official said.

The new militia faction has been attacking the U.S. military in eastern Baghdad. Officials said the splinter group also organized the attempted assassination of Sadr City Mayor Rahim Daraji, a follower of Sadr. Daraji was seriously injured.

Iranian opposition sources also reported the formation of a new wing of the Mahdi Army. Alireza Jafarzadeh, a leader of the National Council for Resistance in Iran, told a briefing on March 20 that death squads from the Mahdi Army were being trained in Iran for operations against Sunni residents of Baghdad.

Still, Sadr continues to control thousands of members of the Mahdi Army, estimated at between 30,000 to 60,000, officials said. They said Sadr has sought to avoid a confrontation with the U.S. military and Shi'ite government in Baghdad during their security mission in the city.

In contrast, officials said, at least one of the new factions of the Mahdi Army has been attacking the U.S.-led coalition. They said Shi'ite agents of Iran have used so-called explosively formed penetrators, designed to penetrate U.S.-origin Abrams main battle tanks.

The largest Iranian-organized splinter faction was said to have been headed by Qais Khazaali. Khazaali was an aide to Sadr until 2005 before he went underground. On March 22, the U.S. military said Khazaali, his brother Laith and some of their aides were arrested.

A third faction of the Mahdi Army has also been formed, officials said. They said this faction broke with Sadr and was moving toward an alliance with Iraqi Prime Minister Nouri Al Maliki.