Sheik Ahmed Majid Farttusi and Sayyid Sajjad are accused of being involved in attacks that killed at least nine soldiers, the Washington Post reported.
A statement from coalition forces described the two men as leaders of Sadr's Mahdi Army, which clashed with U.S. forces in Baghdad and the southern city of Najaf last year.
"I am well aware that the people that we have arrested are prominent individuals in Basra," said Brig. John Lorrimer, commander of the British Army's 12th Mechanized Brigade. "But let me make it absolutely clear: We have acted against them as individuals, not as members of any particular organization."
Dozens of Mahdi Army members with assault rifles marched to the provincial governor's office Sunday in protest of the arrests. They withdrew by early afternoon following a meeting with the governor, the newspaper said.