BAGHDAD — The militia that was once the biggest defender of poor Shiites in Iraq, the Mahdi Army, has been profoundly weakened in a number of neighborhoods across Baghdad, in an important, if tentative, milestone for stability in Iraq.

It is a remarkable change from years past, when the militia, led by the anti-American cleric Muqtada al-Sadr, controlled a broad swath of Baghdad, including local governments and police forces. But its use of extortion and violence began alienating much of the Shiite population to the point that many quietly supported American military sweeps against the group.

Prime Minister Nouri al-Maliki struck another blow this spring, when he led a military operation against it in Baghdad and in several southern cities.

The shift, if it holds, would solidify a transfer of power from Mr. al-Sadr, who had lorded his once broad political support over the government, to Mr. al-Maliki, a Shiite who is increasingly seen as a true national leader.

It is part of a general decline in violence that is resonating in American as well as Iraqi politics: Sen. John McCain argues that the advances in Iraq would have been impossible without the increase in American troops known as the surge, while Sen. Barack Obama, who opposed the increase, says the security improvements should allow a faster withdrawal of combat troops.

The Mahdi Army's decline also means that the Iraqi state, all but impotent in the early years of the war, has begun to act the part, taking over delivery of some services and control of some neighborhoods.

“The Iraqi government broke their branches and took down their tree,” said Abu Amjad, a civil servant who lives in the northern Baghdad district of Sadr City, once seen as an unbreachable stronghold of the group.

The change is showing up in the lives of ordinary people. The price of cooking gas is less than a fifth of what it was when the militia controlled local gas stations, and kerosene for heating has also become much less expensive. Merchants say they no longer have to pay protection money to militiamen.

In interviews, 17 Iraqis, including municipal officials, gas station workers and residents, described a pattern in which the militia's control over the local economy and public services had ebbed. Still, none of the Iraqis interviewed agreed to have their full names published.

The changes are not irreversible. The security gains are in the hands of unseasoned Iraqi soldiers at checkpoints spread throughout Baghdad's neighborhoods. And local government officials have barely begun to take hold of service distribution networks, potentially leaving a window for the militia to reassert itself.

The militia's roots are still in the ground, Abu Amjad said, and “given any chance, they will grow again.”

Majid, a Sadr City resident who works in a government ministry, said militia threats led several Iraqi army officers in his area had to move their families to other neighborhoods after Mr. al-Maliki's military operation.

Bombs are still wounding and killing American soldiers in the district. And early this month, one Iraqi officer's teenage son was kidnapped and killed, his body hung in a public place as a warning, said Majid.

“People are still afraid of the Mahdi Army,” he said. “You still get punished if you talk bad about them.”

One indicator of whether the new gains will hold is whether local governments can fill the gap that the militia left and deliver services effectively.

Brig. Gen. Jeffrey W. Talley, a U.S. Army engineer, said his unit had recently spent $34 million to help reconstruct a major market in Sadr City. But the district council has gotten bogged down in arguments over who has the right to disburse $100 million that Mr. al-Maliki promised after the military operation.

The district council was given 90 days to come up with projects. More than 30 days have passed, and not one proposal has been submitted, council members said.

“To be honest with you, I find it very slow,” said Haidar al-Abadi, an adviser to Mr. al-Maliki who said funds had been held back because militia-affiliated companies had gotten involved. “There's a danger this slowness could backfire.”