Iraqi Shiite leader Abdul Majid al-Khoei and his aide were assassinated on Thursday, members of his family foundation told Reuters.
Ali Jabr of the London-based Khoei Foundation said Abdul Majid, son of the late leader of Iraq's Shiite majority, was killed at the Grand Imam Ali Mosque in Najaf on Thursday afternoon.
Later, fellow Khoei Foundation member Ghanem Jawad told al-Jazeera television that Abdul Majid's aide Haidar Kelidar was also killed.
Iraqi opposition sources in Kuwait said the assassination could trigger infighting among Iraqi Shiites, who make up 60 per cent of the population.
Dissidents say Abdul Majid's rapid return to Iraq -- and America's obvious backing for him -- had sparked intense criticism from other Shiite dissidents.
Abdul Majid's critics also allege that he was not as fiercely opposed to President Saddam Hussein as he wanted his followers to believe. Supporters of Abdul Majid said the US forces had given him the authority to administer Najaf -- another sore point for other Shiite groups.
Abdul Majid was the son of Ayatollah Seyyid Abdulqasim Musawi al-Khoei, who died in 1992 after being placed under house arrest following the crushing of the Shiite uprising in 1991.
Abdul Majid defected to London shortly after the uprising and returned to Najaf last week after US forces took control of the holy city. Supporters said he was helping the Americans restore order in the city of about half a million Shiites.
Khoei's nephew, Jawad al-Khoei, told Reuters from the Iranian holy city of Qom that Abdul Majid was stabbed to death.
"An hour ago we talked to the persons who were with him at the time of the incident. They said he was martyred by treacherous hands," Jawad said.
Jabr and dissident Iraqi cleric Sheikh Fazel al-Haidari said those loyal to Saddam had killed Abdul Majid.
"We should not assume Saddam and his Baath party are finished. These fidayeen [paramilitary] fighters worship Saddam like an idol. He is their preacher," Haidari told Reuters.
Abdul Majid was a key aide of Iraq's leading Shiite leader, Grand Ayatollah Ali al-Sistani, who last week urged his followers not to hinder US and British forces.
Sistani, whose followers pay him religious taxes and look to him for spiritual and practical guidance, is the supreme religious authority in Najaf.
He is also responsible for the shrine of Imam Ali, the son-in-law of the Prophet and the first leader of the Shiite community. The shrine is sacred to Shiites around the world, including more than 60 million believers in Iran.