Recent clashes between the militia and Iraqi forces threaten to undo a lull in the group's activities.
In the end, as many as 18 soldiers were captured after the March 8 ambush, carried out by so-called "rogue elements" of Mr. Sadr's Mahdi Army.
The US responded immediately, cutting off bridges and sealing off all the main entrances to the district as the hunt for the soldiers began.
The next day, the men were freed, but not all of them returned with their guns, newly issued US manufactured M16s that are now believed to be in the hands of an element of Sadr's militia that does not appear to be abiding by a freeze in operations ordered last August. About 10 rifles are missing.
Over the past 10 days, violence has tested the militia's period of quiet, which many say has contributed to a drop in US and Iraqi casualties, and seems to indicate deepening fissures within Sadr's powerful organization.
For the Iraqi Army, the loss of the weapons, even though only a relatively small number, is not only embarrassing but also shows how quickly the M16s, issued recently to replace inferior AK-47s, can fall into enemy hands.
Gen. Naseer al-Abadi, deputy chief of staff of Iraq's armed forces, says this is the first incident of its kind since the fall of last year, when the Army started receiving M16s as part of wider efforts to build up the capabilities of the US-trained force. So far, about 22,000 M16s have been issued to the nearly 200,000-strong army, he says.
"There is a big investigation … this is very serious," said General Abadi. "We will not tolerate anyone losing an M16." He says the soldiers are now in jail pending the investigation.
A series of violent incidents have followed the Sadr City incident in predominantly Shiite areas in the country where the Mahdi Army has great influence.