Ṣadr was the son of Grand Ayatollah Muḥammad Ṣādiq al-Ṣadr, one of the most prominent religious figures in the Islamic world. Ṣadr was greatly influenced by his father's conservative thoughts and ideas and by those of his father-in-law, Ayatollah Muḥammad Bāqir al-Ṣadr, founder of the Islamic Daʿwah Party, who in 1980 was executed for his opposition to Iraqi strongman Ṣaddām Ḥussein.

After completing middle school, Ṣadr enrolled in the Shīʿite ḥawzah (religious seminary) in Al-Najaf, but he never finished his studies. Ṣadr's father was killed in 1999, along with his two older brothers, reputedly by Iraqi agents. His father's will stipulated that his ḥawzah be put in the hands of Sayyid Kāẓim al-Hāʾirī, an Iraqi religious scholar, but Hāʾirī delegated the administrative and financial affairs of the ḥawzah to Ṣadr, who became one of al-Hāʾirī's disciples.

Almost immediately after U.S.-led forces toppled Ṣaddām's regime in 2003 (see Iraq War), Ṣadr emerged from the shadows and began to open offices in his father's name (known collectively as the Office of the Martyr Ṣadr) in Baghdad, Al-Najaf, Karbalāʾ, Al-Baṣrah, and other areas. He had immediate success in Madinat al-Thawrah (Revolution City), a poor Baghdad suburb of two million Shīʿites, which he renamed Ṣadr City in honour of his father. By the end of that year Ṣadr headed a Shīʿite political movement known as the Ṣadrist Movement and had attracted millions of Shīʿite followers across Iraq, mainly youth and the poor and downtrodden, to whom he offered a variety of social, educational, and health services. He also maintained tight security over the areas he controlled and established a court system based on Sharīʿah (Islamic law).

Ṣadr was accused of staging the murder of ʿAbd al-Majīd al-Khūʾī, a rival Shīʿite cleric, and a warrant for his arrest was issued but never executed. Ṣadr concentrated his rhetoric on Iraqi nationalism, especially the removal of U.S. forces from Iraq, and anti-Americanism. His militia, an ill-coordinated collection of thousands of outlaws, engaged in direct armed clashes with the multinational forces in April and August 2004 and was accused of contributing heavily to the ongoing civil conflict between Shīʿites and Sunni (Sunnite)s. Ṣadr's critics held JAM responsible for brutal acts of retribution against Sunnis, including kidnapping, killing, torture, and the destruction of mosques and property.

Many Shīʿites regarded Ṣadr as a hero who opposed the Sunni rebels supporting al-Qaeda (Qaeda, al-) and who protected Shīʿites from Sunni insurgents. In the December 2005 election, members of Ṣadr's movement stood with other Shīʿite parties as part of the United Iraqi Alliance, which won a plurality of seats (128 of 275) in the parliament; 32 seats went to the Ṣadrists. In the formation of the government, Ṣadr supported Nūrī al-Mālikī (Mālikī, Nūrī al-) of the Daʿwah Party for prime minister, but in April 2007 six Ṣadrist ministers withdrew from Mālikī's cabinet after their demands for a timetable for withdrawal of foreign troops remained unrealized. In August Ṣadr made another tactical move, which coincided with the U.S. troop surge—he ordered that his militia suspend all activity for six months, during which time he intended to reorganize it in an attempt to restore its credibility. This suspension of all military activity was extended in late February 2008 for another six months, until August 2008. On March 25, however, the Iraqi government launched a military operation against Ṣadr's militia in Al-Baṣrah, and intense fighting ensued. The militia fought Iraqi troops to a standstill, and on March 30, following negotiations with government officials, Ṣadr ordered a cease-fire.

In August 2008 Ṣadr's plan to reorganize his militia was realized in the launch of al-Mumahhidūn (“Those Who Pave the Way”), an unarmed wing of JAM that Ṣadr declared would focus on social and religious programs; only a small, specialized portion of the original Mahdī Army was to remain armed. A complete restructuring into a solely social organization, including dissolution of the organization's remaining armed branch, was made contingent upon the implementation of a timetable for U.S. withdrawal from Iraq. Shortly thereafter Ṣadr announced the indefinite extension of the cease-fire that had been put in place the previous year.