Protesters set up in Baghdad's Green Zone

Stephen Kalin and Ahmed Rasheed

Hundreds of supporters of Shi'ite Muslim cleric Moqtada al-Sadr have stormed into Baghdad's Green Zone and set up tents beside parliament after Sadr denounced politicians' failure to reform a political quota system blamed for rampant corruption.

The protesters, who had gathered outside the heavily fortified district housing government buildings and many foreign embassies, crossed a bridge over the Tigris River on Saturday chanting: "The cowards ran away!" - an apparent reference to departing politicians.

The initial breach was mostly peaceful, but around sunset security forces fired teargas and bullets into the air in an effort to stop more protesters from entering.

About a dozen people were wounded, police sources said.

A United Nations spokesman and Western diplomats based inside the Green Zone said their compounds were locked down.

A US embassy spokesman denied reports of evacuation.

Iraqi security personnel and Sadr's militiamen formed a joint force to control protesters' movement, a source in Sadr's office told Reuters.

Most protesters had evacuated parliament and some were preparing for a sit-in in its courtyard, he added.

An army special forces unit with armoured vehicles was dispatched to protect sensitive sites, two security officials said, but no curfew had been imposed.

All entrances to Baghdad were shut "as a precautionary measure to maintain the capital's security", another security official said.

Prime Minister Haider al-Abadi has warned that the months-long political crisis prompted by his efforts to overhaul the cabinet could hamper the war against Islamic State, which controls vast swathes of northern and western Iraq.

Earlier in the day, the ultra-hardline Sunni militants claimed responsibility for a suicide bomb attack against a gathering of Shi'ite pilgrims in the southeast of Baghdad, killing 19 people and wounding 48 others.

Sharqiya TV showed Abadi walking inside the Green Zone with dozens of armed guards following the breach, discrediting reports he had fled.

He called on protesters to return to areas set aside for demonstrations and not to infringe on public property.

Such a breach is unprecedented, though only a few years ago mortars frequently rained down on the 10-square-kilometre Green Zone, which once housed the headquarters of the US occupation and before that a palace belonging to Saddam Hussein.

Checkpoints and concrete barriers have blocked bridges and highways leading to the neighbourhood for years, symbolising the isolation of Iraq's leadership from its people.