Near Najaf, Iraq ? The U.S. Army encircled the Shiite holy city of Najaf on Sunday and said it killed about 100 paramilitary fighters and captured about 50 Iraqis.

The “terror squad members” were killed Sunday at Najaf and another town in fighting with the 82nd Airborne Division, the Central Command said in a statement today. It did not further identify the “terror squads” or give other details about the newly captured Iraqis.

The 101st Airborne Division surrounded Najaf, preparing for a possible door-to-door battle to root out Saddam Hussein’s fighters — but leery of damaging some of the faith’s most sacred shrines.

Further north, Army brigades crept closer to Baghdad, advancing 10 miles with little resistance, though battles with the Republican Guard loomed. To the south, Marines launched “search-and-destroy” missions to clear the road to Baghdad of Iraqi attackers.

But it was at Najaf — a city of 300,000, 100 miles south of Baghdad — that U.S. military leaders were faced with a difficult decision.

It is in Najaf that Ali, son-in-law of the prophet Muhammad, is buried at an extraordinary shrine, its gold dome and twin minarets gleaming for miles. It is surrounded by low buildings and narrow streets, a nightmare of an urban battleground.

Other Muslim holy figures are buried there and at the vast al Wadi es Salaam cemetery — one of the world’s largest — that forms a semicircle around the city. Officers speaking on condition of anonymity said some of the Iraqi fighters were hiding there.

A battle that destroyed these holy places could inflame passions of Shiites in Iraq and elsewhere, most notably Iran.

The United States has been hoping that Shiite Muslims, who represent 60 percent of Iraq’s population, will rise up against Saddam and his largely Sunni leadership.

Capt. Micah Pharris, an attorney in the 101st Airborne’s judge advocate general’s office, said some locations in Najaf were on the military’s “no target” list — to be fired at only in self-defense.

“We take our responsibility to these things very seriously and treat them with the utmost respect,” he said.

So the Army still held out hope that the battle could be avoided. Using loudspeakers mounted on Humvees, U.S. soldiers on Najaf’s perimeter will soon beseech its townspeople to turn over Saddam’s zealots.

To the north, brigades of the Army’s 3rd Infantry Division advanced 10 miles to near Karbala, just 50 miles from Baghdad — also a Shiite holy city. One battalion was slowed by the need to shepherd dozens of surrendering Iraqi soldiers.

A military intelligence officer, fluent in Arabic, spoke with farmers who now faced hundreds of U.S. armored vehicles outside their window.

The officer held out fistfuls of candy for the children. The Iraqi men at first stood back, hands behind their heads, struggling to hold up the sticks on which they had tied flour bags in a sign of surrender.

The officer’s message: U.S. forces would not hurt them, but they needed to stay away from the American soldiers.

Republican Guard positions between Karbala and Baghdad continued to be targeted for allied bombardment — Gen. Richard Myers, chairman of the Joint Chiefs of Staff, said more than half of Sunday’s sorties were directed at the guard, Saddam’s best forces.