Lawmakers who presented the plan to Grand Ayatollah Ali al-Sistani in the holy city of Najaf said they were told the unity of Shiites, who have the largest bloc in parliament, had to come first.
By shunning the coalition plan, al-Sistani sought to unite the Shiite's fractured 130-member United Iraqi Alliance. But his decision — which carries great weight with the country's Shiite majority — significantly weakens American hopes for a national unity government and strengthens the hand of the radical Shiite cleric Muqtada al-Sadr.
Al-Sistani's decision may not doom the proposed coalition, but it significantly reduces its chances.
"There are obstacles in the face of forming this coalition, because al-Sistani does not support it," said Hassan al-Suneid, a top aide to Prime Minister Nouri al-Maliki.
An official close to al-Sistani, who spoke on condition of anonymity because he was not authorized to talk to the media, said the cleric "will not bless nor support any new bloc or front. He only supports the unity of the Shiites."
The proposed coalition — which would not have included al-Sadr's supporters — could have isolated the militant cleric, commander of a militia army blamed for many sectarian attacks.
Two U.S. soldiers were killed Saturday in separate roadside blasts near Baghdad, the U.S. military said. One bomb exploded southeast of the capital near a patrol searching for "suspected terrorists," it said. That blast also wounded four other U.S. soldiers. The other bomb exploded southwest of Baghdad, near a patrol delivering supplies to units in the area.
Police in Baghdad said they discovered 47 bodies — apparent victims of violence between Sunni and Shiites.
Meanwhile, President Bush met with his new defense secretary Robert Gates at his presidential retreat in Camp David, Md., to discuss military options for Iraq including a proposal to send thousands more troops to the 140,000 already in Iraq to try to quell escalating violence, particularly in Baghdad.
The president is expect to announce a revamped Iraq strategy in a speech to the nation between New Year's Day and Jan. 23, when he gives his State of the Union address.
In Iraq, the focus was on politics. Several weeks ago, 30 Iraqi lawmakers and six Cabinet ministers who support al-Sadr launched a boycott of the government. They were protesting a meeting between the prime minister and President Bush.
Now the 275-member Iraqi parliament is in virtual paralysis.
On Saturday, the same Shiite delegation in Najaf that courted al-Sistani tried to persuade al-Sadr to bring his supporters back into government. Al-Sadr did not give a definite answer, according to some of those who met with him.
"He will give his final decision whether to rejoin the government and parliament after Eid al-Adha," Khaled al-Attiya, an independent who is parliament's deputy speaker, said after the meeting. Iraq's Shiites will celebrate the holiday from Dec. 31 to Jan. 4.
Some of al-Sadr's aides had earlier said he would soon end his political boycott and call off attacks by his militia, at least temporarily.
But al-Sistani's rejection of the new coalition — which would have excluded al-Sadr's supporters — strengthened his hand.
Al-Sistani holds no political post and rarely emerges from his home and adjacent office. But his word is considered law by many Shiites.
Despite this, Shiite militants, including members of al-Sadr's Mahdi Army, have not heeded al-Sistani's appeals for peace in Iraq. Many Iraqis on both sides of the sectarian divide view militias as their only form of defense.
One of al-Sadr's key demands is a timetable for the withdrawal of U.S. forces from Iraq.
Without progress toward political reconciliation in Iraq, some observers say, the security situation in the country is likely to remain grim.
In violence on Saturday, an Iraqi military intelligence officer was killed in a drive-by shooting south of Baghdad, police said. Six civilians were killed when a mortar shell hit a house in Baqouba, north of the capital. U.S.-led forces raided a militant hide out in Ramadi, west of Baghdad, killing one person and detaining nine.