"Transferring the US Embassy to Jerusalem would be a public and more-explicit-than-ever declaration of war against Islam," said the statement posted Tuesday on Sadr's website.
White House press secretary Sean Spicer insisted earlier this week that no decision had been made
on moving the US Embassy to Jerusalem from Tel Aviv.
A senior Trump administration official said Monday that moving the US Embassy to Jerusalem from Tel Aviv remains a priority for the President but cautioned that it would not happen quickly. No announcements are expected in the coming days, the official said, adding that working on the issue will be one of the first tasks awaiting Jared Kushner, a senior adviser and son-in-law to Trump.
Sadr urged the "formation of a special division to liberate Jerusalem were the decision to be implemented."
He also said the Arab League and the Organization of Islamic Cooperation should take a decisive stand on the issue or dissolve themselves.
Sadr, a highly influential Iraqi figure, called "for the immediate closure of the US Embassy in Iraq" if the embassy transfer to Jerusalem from Tel Aviv were to happen.
The statement added: "If, however, they back away from it [the embassy move], it means that America will open a new page with the Middle East and the Arab and Islamic countries."
White House: 'very early stages'
Spicer told reporters Monday, "We're at the very early stages of that decision-making process."
He later said that the Trump administration was going to "continue to consult with stakeholders as we get there."
In an interview in March 2016, Trump told CNN that moving the embassy would happen "very quickly."
If the United States moved the embassy to Jerusalem, it would mean that the US effectively recognizes Jerusalem as the capital of Israel.
That would overturn 70 years of international consensus, and, many argue, would effectively signal the end of moves to achieve peace between Israelis and Palestinians.
The move would be sure to anger the United States' Arab allies in the region, because both the Israelis and the Palestinians lay claim to Jerusalem.
Sadr is best known to Western audiences for his role leading the Mehdi Army, which he formed in 2003 during the US invasion of Iraq.
The militia is considered the armed wing of the Sadrist movement, which followed the teachings of Sadr's father. Its power base was in Najaf and the massive Sadr City in eastern Baghdad, which is home to more than 2 million Shias.
Last year, a speech by Sadr following an attack in Baghdad by ISIS sparked a massive protest
that ended with Iraqis storming the city's Parliament and Green Zone.