"I found it would be beneficial to take a break and postpone all of this until the end of the month," he said in a statement.
His followers have been holding weekly protests to demand reform and an end to corruption, bringing the city to a standstill every Friday as security forces deployed en masse.
Signup to our newsletter and follow us on Facebook and Twitter!
Sadr called for the preparation of "a peaceful, popular million-man protest" after Ramadan ends in July and warned that he would not rein in his forces if protesters were confronted.
Protesters led by Sadr supporters have breached Baghdad's fortified Green Zone twice already over the past two months, storming parliament and the prime minister's office.
The last time was on May 20 and saw tension in Baghdad rise as Sadr's militia Saraya al-Salam and other armed groups loyal to rival factions in government faced off on the street.
Several protesters were also killed and wounded by the security forces defending the Green Zone, which is home to the country's top institutions.