Heavy machine-gun fire was heard for more than 10 minutes after two explosions rocked the capital at around 11:10 pm (1910 GMT).
Meanwhile, an AFP correspondent in Sadr City, a Shiite Muslim slum to the north-east of the capital, said several explosions occurred in an area where US tanks have been deployed around police stations.
The blasts were followed by tank fire and machineguns.
Clashes have pitted US-led coalition troops and followers of Shia leader Moqtada Sadr in Baghdad and other southern cities since Sunday.
US troops backed by helicopters battled Shia radicals on Monday after clashes left more than 50 dead and the US-led coalition announced the rebels' ringleader firebrand cleric Moqtada Sadr was wanted for murder.
As the Americans tackled the new front opened up by Sadr and his Mehdi Army militia, US marines launched a major offensive against the longstanding Sunni Muslim insurgency in the flashpoint western town of Fallujah.
One marine was killed in the restive province of Al-Anbar Monday as his comrades kicked off Operation Vigilant Resolve to hunt down the insurgents who brutally murdered four US contractors in Fallujah last week.
The campaign of violence by the Shia radicals raised serious alarm for coalition troops who were initially welcomed by Iraq's majority community after years of vicious rule by Saddam Hussein's Sunni-dominated regime.
Already burdened by a Sunni insurgency, a full revolt among the country's 15 million-plus Shias would spell disaster.
A coalition spokesman revealed Monday an arrest warrant was in force against Sadr for the murder of a rival cleric, Abdel Majid al-Khoei, last April, days after the fall of Saddam.
Aides of the anti-coalition firebrand, who is currently barricaded in a mosque in the shrine city of Kufa, vowed that he would never be captured.
"We will be human shields for his protection," said Hazem al-Araji, director of the cleric's office in Kadhimiya, a Shiite district of the capital.
The coalition's deputy director of operations, Brigadier General Mark Kimmitt, promised Sadr would be treated with respect if he surrendered, despite the deaths of eight US and one Salvadoran soldiers in clashes with his illegal Mehdi Army militia.
"He has not been taken into custody. He has not been served with a warrant at this time. A lot will depend on how he intends to face the news whether he decides to come peacefully," the US general said.
Sadr's aide, Mustafa Yaacubi, had been arrested on Saturday in connection with the murder of Khoei who was stabbed on April 11 last year by a mob inside the Imam Ali mausoleum in Najaf, one of Shiite Islam's holiest shrines.
Yaacubi was handed over to Iraqi police on Monday to await trial by Iraq's central criminal court. The coalition declined to say why the decision had been taken to serve the warrants now, months after they had been issued by an Iraqi investigative magistrate.
It was Yaacubi's arrest that triggered the orgy of violence by Sadr supporters after a week of relatively peaceful protests against the suspension of their weekly newspaper on charges of inciting violence.
Apache helicopters fired on Sadr's Mehdi Army militiamen during fierce battles in the western Baghdad district of Al-Showla Monday, an AFP correspondent on the scene said.
The fighting erupted when American soldiers and US-trained Iraqi Civil Defence Corps personnel tried to enter the district and were attacked by Sadr supporters, witnesses said.
The Iraqi auxiliaries then turned their guns on the US troops, forcing them to abandon their vehicles, which were set ablaze, witnesses said.
The coalition's commanderm for the capital, Brigadier General Mark Hertling vowed to crush Sadr's militia. "At least in Baghdad, they'll be very sorry they did this," he told AFP.
In the capital's largest Shia neighbourhood of Sadr City, thousands of angry residents gathered to bury the victims of pitched battles Sunday between Sadr supporters and US troops.
"There is only one God. America is the enemy of Allah," chanted the crowd.
Hospital officials in Baghdad said that 22 Iraqis were killed and 85 wounded Sunday. The US military said it lost eight men in the violence as its forces were besieged by anywhere between 500 and 1,000 men.
The fighting was the worst to erupt in Baghdad since US troops entered the capital last April.
The coalition's civil administrator, Paul Bremer, declared Sadr an outlaw and pledged that US forces would stop his power grab.
"He is attempting to establish his authority in the place of the legitimate authority. We will not tolerate this," Bremer told a national security meeting.
But in southern Iraq, Sadr's followers pressed on with their violent protests, seizing government buildings and holy shrines in defiance of US threats and calls for calm from more moderate Shiite leaders.
In the British-controlled city of Basra, Mehdi Army militiamen stormed the governor's office at dawn on Monday, raising a green Islamic flag on the roof, an AFP correspondent said.
Two people were wounded as the militiamen traded fire with British troops during the afternoon.
Tempers also ran high in the pilgrimage cities of Najaf and Kufa, where Sadr was holed up, after his militiamen seized control of two Shiite shrines Monday, an AFP correspondent said.
On Sunday, there was fierce fighting in Najaf between the radicals and Spanish-led troops in which 23 people were killed, including a Salvadoran soldier.
In the holy city of Karbala further north, Sadr supporters clashed with police in an attempt to seize public buildings, including the governor's office, and revered shrines.
At least one policeman was killed and 11 wounded in the clashes, medics said.
US marines announced their new assault on Fallujah as a blistering response to last week's murder of the four American civilians, two of whom were hanged.
"Our concern is precise. We want to get the guys we are after. We don't want to go in there with guns blazing," said Lieutenant James Vanzant.
Marines slapped an 11-hour night curfew on the city as patrols blared messages telling people not to leave their homes.