US troops killed an estimated 26 suspected militants in Sadr City this morning in one of the fiercest clashes in the Shia stronghold since the 2003 US-led invasion of Iraq.
Residents of the east Baghdad slum district, a bastion of fiery Shia cleric Moqtada al-Sadr and his Mehdi Army militia, said the fighting lasted six hours and involved helicopter-fired missile strikes.
The US military said American forces staged two separate raids into Sadr City targeting militants suspected of close ties to "Iranian terror networks" and who were responsible for bringing Iranian weapons into Iraq.
"Coalition Forces killed an estimated 26 terrorists and detained seventeen suspected secret cell terrorists during the two operations," a US military statement said.
No aircraft had been used in the operation and there were no civilian casualties, the US military said separately.
A witness at a Sadr City hospital said nine civilians were wounded. Other residents said several cars were burned and they insisted all the people killed in the clashes were civilians.
People were still cleaning up hours later alongside homes whose walls were pock-marked by bullets fired in the fighting.
The US military has launched a major offensive around the capital to break up militants' networks and drive out Sunni Islamist and al Qaeda fighters.
Operations are backed by 28,000 troops ordered to Iraq by US President George W. Bush in a fresh security crackdown.
The pre-dawn raids, which the US military said were met with a hail of gunfire and rocket propelled grenades, risk escalating tensions with the Mehdi Army - Sadr's powerful militia that has kept a relatively low profile since the latest clampdown got under way.
Washington blames rogue Mehdi Army elements of using technologically advanced roadside bombs, which are made from components smuggled in from Iran, to target US troops.
One of these potent devices was probably used in an ambush that killed five US soldiers in Baghdad yesterday. US forces also say that mortars fired almost daily at the heavily fortified Green Zone, which houses the US and other foreign embassies as well as the Iraqi government, are made in Iran.
"There's no doubt that they are coming out of Iran," Major General Joseph Fil, who commands US troops in the capital, told reporters in Washington yesterday.
"Most of them have been made fairly recently, in the past several years ... I'll also say that most of these are coming from the eastern side of the river, by far the majority, in and around the Sadr City area," he said, speaking via video link.