Najaf — Iraqi Protesters set fire to Iran's consulate in the holy city of Najaf on Wednesday night, two months into the country's most serious social crisis in decades.

Tall flames and thick clouds of smoke rose from the entrance of the consulate in the southern city, AFP's correspondent there said.

"Victory to Iraq!" and "Iran out!" protesters chanted, outraged at the country they blame for propping up a government they've been demonstrating against for nearly two months.

Since October 1, protesters in Iraq have been calling for the fall of a central government they see as both irretrievably corrupt and beholden to Tehran.

Iraq's capital and its Shiite-majority south have been gripped by the largest grassroots protests since 2003.

The change of regime 16 years ago opened the door for Baghdad's eastern neighbour to develop tremendous economic, political and military sway, now slammed by protesters as overreach.

Iran's consulate in Karbala was targeted earlier this month, and security forces defending the site shot four demonstrators dead at the time.

In Najaf on Wednesday, units fired tear gas that wounded several dozen but ultimately retreated as hundreds of people encircled the consulate and lit tyres, blankets, cardboard and other items, AFP reported.

The protesters broke into the building itself, which had been apparently evacuated of its Iranian staff.

Earlier on Wednesday, Two protesters were shot dead in Baghdad and other Iraq cities were shrouded in acrid smoke from burning tires as demonstrators pressed their campaign of anti-government rallies.

Masked youths sealed off streets with makeshift barricades across the restive south as schools and public offices stayed shut.

"The government has lost all its legitimacy. We don't want them," said one protester in the southern city of Basra. "They meet every day and claim to be discussing our demands, but we expect nothing from them."

In central Baghdad, young demonstrators donned helmets and medical masks to face off again with security forces unleashing tear gas.

Iraqi medical and security sources said at least two demonstrators were shot dead in Baghdad as protesters and security forces clashed. A correspondent reported volleys of gunfire from behind concrete barricades where the security forces were deployed. AFP