By Stephen Kalin and Ahmed Rasheed
BAGHDAD (Reuters) - Hundreds of supporters of Shi'ite Muslim cleric Moqtada al-Sadr stormed parliament inside Baghdad's Green Zone on Saturday and camped out nearby after Sadr denounced politicians' failure to reform a political quota system blamed for rampant corruption.
The protesters, who had gathered outside the heavily fortified central district housing government buildings and many foreign embassies, crossed a bridge over the Tigris River chanting: "The cowards ran away!" in apparent reference to departing lawmakers.
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. Around a dozen people were wounded, police sources said.
A United Nations spokesman and Western diplomats said their compounds inside the Green Zone were locked down. A U.S. embassy spokesman denied reports of evacuation.
Iraqi security personnel and Sadr's militiamen formed a joint force to control crowds of protesters, most of whom had left parliament, a source in Sadr's office told Reuters.
All entrances of Baghdad were temporarily shut "as a precautionary measure to maintain the capital's security," another security official said.
As night fell, demonstrators set up tents at a nearby parade ground under triumphal arches made from crossed swords held by hands modelled on those of Saddam Hussein, who was toppled by the U.S.-led invasion in 2003.
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 Shi'ite pilgrims in the southeastern Baghdad suburb of Nahrawan, killing 19 people and wounding 48 others.
Following the breach, Abadi inspected security forces inside the Green Zone, discrediting earlier reports that 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 U.S. occupation and before that one of Saddam's palaces.
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.
Videos showed protesters on Saturday attacking a white, armoured SUV with sticks and beating a man in a grey suit.
The source in Sadr's office said a Sadrist MP had escorted out several deputies, the last ones holed up in parliament, in his motorcade.
Members of the Peace Brigades, Sadr's paramilitary group, had earlier conducted cursory checks of protesters as government security forces who usually make careful searches with bomb-sniffing dogs stood by the side, a Reuters witness said.
More protesters remained at the gates chanting "Peaceful!". Some stood atop concrete blast walls that form the district's outer barrier.
President Fuad Massoum called on demonstrators to leave parliament, but urged politicians to implement the cabinet reform: "Burying the regime of party and sectarian quotas cannot be delayed."
GREAT POPULAR UPRISING
Inside parliament hundreds of protesters danced, waved Iraqi flags and chanted pro-Sadr slogans. Some appeared to be breaking furniture.
Local television showed them chanting and taking pictures of themselves inside the main chamber where moments earlier lawmakers had met.
Parliament failed to reach quorum on Saturday afternoon to complete voting on a cabinet reshuffle first urged by Abadi in February. A handful of ministers were approved on Tuesday despite disruptions by dissenting lawmakers.
Political parties have resisted Abadi's efforts to replace some ministers - chosen to balance Iraq's divisions along party, ethnic and sectarian lines - with technocrats in a bid to combat corruption.
Supporters of Sadr, whose fighters once controlled large areas of Baghdad and helped defend the city from Islamic State in 2014, have been demonstrating in the capital for weeks, responding to their leader's call to put pressure on Abadi to follow through on months-old reform promises.
Moments before the Green Zone breach, Sadr seemed to offer an ultimatum: "Either corrupt (officials) and quotas remain or the entire government will be brought down and no one will be exempted."
In a televised speech from the holy city of Najaf announcing a two-month withdrawal from public life, Sadr said he was "waiting for the great popular uprising and the major revolution to stop the march of the corrupt."
(Additional reporting by Saif Hameed, Kareem Raheem and Ahmed Saad; Writing by Stephen Kalin; Editing by Richard Balmforth and Ros Russell)