Tear gas fired as protesters storm Baghdad's Green Zone
Several foreign missions in the restricted area, which is home to most government ministries and foreign embassies, evacuated their employees due to the unrest.
The UN mission in Iraq, also headquartered in the Green Zone, said it was "gravely concerned" over the situation.
The United Nations Assistance Mission for Iraq (UNAMI) issued a statement condemning violence against elected officials and urging "calm, restraint and respect for Iraq's constitutional institutions at this crucial juncture."
The statement added that the UN mission "continues to operate from its headquarters in Baghdad's International Zone and is in constant contact with parties to facilitate a solution that meets the demands of the people for reform".
Earlier on Saturday, police and troops guarding the heavily-fortified zone appeared to be taking no action when rioters also rampaged through several parts of the parliament building.
Sabah al-Numan, spokesman for the counterterrorism forces, says "we still view this as a demonstration" and "aren't taking any part in this as it's not something regarding terrorism."
He adds, however, that if the unrest escalates his forces may be forced to intervene to "protect the legitimacy of the government."
Meanwhile, US helicopters were spotted flying on low altitude over the US embassy in the Green Zone as protesters approached the premises, the correspondent added.
Sources told The New Arab that Prime Minister Haidar al-Abadi was preparing to give a speech addressing the Iraqi people later today.
The escalation comes after lawmakers again failed to reach a quorum and approve new cabinet ministers to replace the current government of party-affiliated ministers.
'Combating corruption and waste'
The unrest kicked off minutes after Sadr wrapped a news conference in the holy Shia city of Najaf during which he condemned the political deadlock, but did not order supporters to enter the Green Zone.
The influential Shia leader accused Iraqi politicians of blocking efforts to implement political reform aimed at combating corruption and waste.
This escalation marks the first time protesters have breached the Green Zone after months of protests, sit-ins and demonstrations outside the compound.
|See in pictures: Supporters of Moqtada al-Sadr protest in Iraq
|Thousands of protesters broke into Baghdad's heavily
fortified 'Green Zone' [The New Arab]
"You are not staying here! This is your last day in the Green Zone," shouted one protester as thousands broke into the area in central Baghdad that houses parliament, the presidential palace, the prime minister's office as well as the US and several other embassies.
Protesters attached cables to the tops of heavy concrete blast walls that surround the Green Zone, pulling them down to create an opening, television footage showed.
They also pulled barbed wire across a road leading to one of the exits of the Green Zone, effectively preventing some scared lawmakers from fleeing the chaos.
Several vehicles the protesters believed belonged to lawmakers were attacked and damaged.
Iraq has been hit by weeks of political turmoil surrounding Abadi's efforts to replace the cabinet of party-affiliated ministers with a government of technocrats.
Increasingly tense protests and a series of failed reform measures have paralysed Iraq's government as the country struggles to fight the Islamic State group and respond to an economic crisis sparked in part by a plunge in global oil prices.
Agencies contributed to this report