* Mehdi army takes over centre of Nassiriya
* Iraq lawmakers to hold emergency session
* Baghdad under curfew (Updates with Maliki statement)
By Ross Colvin
BAGHDAD, March 28 Fighters loyal to Shi'ite cleric Moqtada al-Sadr have seized the centre of the southern Nassiriya city, a Reuters witness said on Friday.
A four-day-old Iraqi army crackdown on Shi'ite cleric Moqtada al-Sadr's Mehdi Army in Basra, Iraq's second city and its gateway to the Gulf, has sparked fighting across the south and in Baghdad.
In the capital, Iraqi lawmakers were due to hold an emergency session in a bid to end violence in the flashpoint oil city of Basra, where Prime Minister Nuri al-Maliki gave militants a new deadline to hand over their weapons.
A Reuters reporter in Nassiriya, capital of Dhi Qar province, said he could see groups of fighters with machineguns and rocket-propelled grenade launchers. The sound of sporadic gunfire echoed through the streets. Police appeared to be staying in their stations, he said.
Militants have also taken control of the town of Shatra, 40 km to the north, he said, citing witnesses.
Authorities have imposed a three-day curfew in Baghdad to contain the violence, in which more than 150 people have been killed since the government launched the offensive on Tuesday against Sadr's followers.
The assault on Basra has exposed deep divisions between rival factions within Iraq's majority Shi'ite community. It is also a major test for Maliki's ability to prove Iraqi forces can stand on their own and allow U.S. forces to withdraw.
Maliki on Wednesday gave militants in Basra 72 hours to surrender themselves and their weapons, but on Friday extended the deadline for handing over the weapons until April 8.
"All those who have heavy and intermediate weapons are to deliver them to security sites and they will be rewarded financially," he said in a statement issued by his office.
With violence spreading across the Shi'ite south and affecting the country's vital oil exports, lawmakers called an emergency session on Friday.
"Today (Thursday) we reviewed the situation in Basra. We agreed to hold an emergency session tomorrow to discuss the Basra situation and how to resolve it," parliament speaker Mahmoud Mashhadani told Reuters.
Mashhadani said representatives of Shi'ite and Sunni parties in parliament, including lawmakers loyal to Sadr, had agreed to attend the special session starting at 3 p.m. (1200 GMT).
Sadr, who helped install Maliki in power after an election in 2005 but later broke with him, has called for talks with the government. But Maliki has vowed to battle what he calls criminal gangs in Basra "to the end".
Basra was reported to be quiet on Friday morning, as were the other two flashpoint southern towns of Kut and Hilla, where there have been heavy clashes between Mehdi Army fighters and U.S. and Iraqi forces this week.
The U.S. military said in a statement on Friday that members of an Iraqi Special Weapons and Tactics unit (SWAT) and U.S. special forces had killed 14 militants and wounded 20 in fierce battles in Kut on Wednesday. Nine SWAT members were killed.
The clashes have all but wrecked a truce that Sadr imposed on his Mehdi army last August, which Washington had said helped curb violence.
The government says it is fighting "outlaws", but Sadr's followers say political parties in Maliki's Shi'ite-led government are using military force to marginalise their rivals ahead of local elections due by October.
U.S. President George W. Bush has praised Maliki's "boldness" in launching the operation, the largest military campaign carried out yet by Maliki's forces without U.S. or British combat units. Bush said it showed the Iraqi leader's commitment to "enforce the law in an even-handed manner".
Sadr's followers have staged a "civil disobedience" campaign, forcing schools and shops to shut, and Sadr has threatened to declare a "civil revolt" if the crackdown is not halted.
Clashes have spread in the past two days to the southern cities of Kut, Hilla, Nassiriya, Diwaniya, Amara and Kerbala, as well as 13 predominantly Shi'ite neighbourhoods of Baghdad. (Writing by Ross Colvin, additional reporting by Waleed Ibrahim; Editing by Samia Nakhoul)