Yet instead of violence, they are facing an even bigger problem - a vast, crowded slum where years of misery and government neglect have created conditions for the militias to thrive.
US soldiers worry that, unless things improve - and soon - the people of Sadr City will quickly tire of their presence.
"There are a lot of days when I'm like, 'It's going to take a miracle to make this work'," Lieutenant Jacob Czekanski said as he stared at a football field surrounded by rubbish. "We will always be viewed as outsiders here."
In a capital where public services barely function and five straight hours of electricity is a cause for celebration, Sadr City stands out. Some 2.5 million people, nearly all of them Shiites, live in the northeastern Baghdad community. Many of them lack running water and proper sewerage. Hundreds of thousands have no jobs and subsist on monthly food rations, a throwback to the international sanctions of the Saddam Hussein era.
Streets in some parts of Sadr City run black with sludge. Damaged power lines provide, at best, only four hours of electricity a day.
Many US soldiers were unprepared for what they found. During a patrol last week, troops brushed flies from their faces as they drove through rotting heaps of refuse and excrement that were piled outside houses. One soldier opened his Humvee's door and vomited.
Improving the quality of life for Iraqis - including those in Sadr City - is part of the American strategy, articulated by the new US commander, General David Petraeus. Once areas have been rid of insurgents, criminals and death squads, the US hopes to pump in cash to encourage small businesses and revive the local economy.
The plan is for the Americans and their Iraqi counterparts to stay in the neighbourhoods to keep the militants from returning. But first comes security: economic improvement will have to wait until the streets are safe.
"This is their lifestyle. This is how they've been doing it for hundreds of years. And they're not going to change overnight," Captain Seth Crawford said.
After seeing how the people of Sadr City live, some soldiers say they understand the appeal of the militias, which provided some services the government could not. The al-Mahdi Army not only guarded against Sunni gunmen but provided rudimentary health care and other services for impoverished Shiites.
With new understanding have come new tactics. Instead of kicking in doors, soldiers knock first. Aggressive behaviour could provoke an uprising, soldiers say. "It's not so much ideology that the people flock to here, it's whoever can provide them with their basic needs," Lt Czekanski said.
For now, the atmosphere in the neighbourhood is not openly hostile. Posters of Muqtada al-Sadr, who led two uprisings against coalition forces in 2004, no longer appear on billboards and walls. Even some anti-American graffiti have been covered. But how long this will last is anyone's guess.
HERO'S WELCOME AS IRAQI PRESIDENT RETURNS WITH VOW FOR KURDS
JALAL Talabani, the president of Iraq, was greeted by thousands of Kurds as he returned to Iraq yesterday and vowed to pursue a federal system of government.
Mr Talabani returned to the northern city of Sulaimaniya after two weeks in a Jordanian hospital where he was recovering from exhaustion.
"I am with you until the final breath in realising the goal of a democratic and federal Iraq," Mr Talabani told the crowd to a huge cheer.
People in the crowd waved Kurdish flags and others danced to loud music before Mr Talabani's arrival in a party atmosphere.
Mr Talabani, a former Kurdish rebel leader in his early seventies, was flown to Jordan for medical tests on 25 February for fatigue and had been recuperating in hospital since. It was not clear when he would return to work. However, an official from his party said he was in good health and would spend several days resting in Sulaimaniya before returning to his office in Baghdad.