However, supporters of radical Shi'ite cleric Muqtada al-Sadr accused U.S. troops of killing 20 worshippers at a mosque in roughly the same area.
Iraqi state television carried footage of the bloodied corpses of men in civilian clothing, calling them victims of U.S. gunfire.
The U.S. military denied entering or damaging any mosque and said U.S. special forces troops were on hand only as advisers.
A spokesman for Prime Minister Ibrahim al-Ja'fari said the premier was "deeply concerned" and had called the U.S. commander in Iraq, General George Casey, who said there will be a full inquiry.
In a second incident, U.S. troops reportedly detained at least 40 Iraqi police officers after raiding an Interior Ministry building and discovering a secret bunker housing 17 foreign prisoners.
The nationalities of the prisoners were not immediately available.
There has been no official comment from the U.S. or Iraqi authorities.