Associated Press reporters at the scene say thousands of protesters have entered the Green Zone since breaching the walls and storming parliament earlier on Saturday.
The heavily guarded area is home to most government ministries and foreign embassies.
The entry of the protesters marks a major escalation after months of demonstrations and sit-ins by al-Sadr's followers, who are calling for wide-ranging political reforms aimed at combatting corruption and waste.
The U.N. mission to Iraq says it is "gravely concerned" after anti-government protesters breached the heavily-guarded Green Zone and stormed parliament.
The United Nations Assistance Mission for Iraq (UNAMI) is headquartered in the Green Zone along with most government ministries and embassies.
After Saturday's breach, UNAMI issued a statement condemning violence against elected officials and urging "calm, restraint and respect for Iraq's constitutional institutions at this crucial juncture."
It says the U.N. 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."
The protesters are supporters of Shiite cleric Muqtada al-Sadr, who has called for wide-ranging political reforms to combat the corruption and mismanagement that has bedeviled Iraq since the 2003 U.S.-led invasion.
Iraq's elite counterterrorism forces, who have in the past been called on to reinforce security in the capital, say they are standing down for now after anti-government protesters breached the Green Zone.
Police and troops guarding the heavily-fortified zone, where most ministries and embassies are located, appeared to be taking no action after protesters breached the walls and stormed into parliament Saturday.
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."
The protesters, who support Shiite cleric Muqtada al-Sadr, are demanding political reforms to combat corruption and mismanagement.
Iraqi forces are tightening security in the capital after anti-government protesters breached the Green Zone and stormed parliament.
The Baghdad Operations Command says all traffic attempting to enter the capital through the city's main checkpoints was halted after the breach on Saturday, and additional police and military units have been deployed to the Green Zone, closing the checkpoints on the compound's outer perimeter and blocking internal roads.
The heavily-guarded Green Zone is home to most of Iraq's ministries and foreign embassies.
Supporters of Shiite cleric Muqtada al-Sadr stormed the Green Zone earlier on Saturday, marking a major escalation after months of demonstrations and sit-ins demanding political reforms to combat corruption and waste.
Dozens of protesters have climbed over the blast walls surrounding Baghdad's highly-fortified Green Zone and could be seen storming into parliament, carrying Iraqi flags and chanting against the government.
After months of protests, sit-ins and demonstrations outside Baghdad's Green Zone - home to most ministries and foreign embassies - Saturday's escalation marks the first time protesters have breached the compound's walls.
Earlier Saturday, influential Shiite cleric Muqtada al-Sadr accused Iraqi politicians of blocking efforts to implement political reform aimed at combating corruption and waste.
Increasingly tense protests and a series of failed reform measures have paralyzed 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.
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