However, an Iraqi defence ministry official said an air strike launched in support of the ground raid hit cars lined up to purchase gas at a nearby petrol station, and that those killed were innocent civilians.

The US military statement said the man detained in the raid had been "acting as a proxy for an Iranian Revolutionary Guard Corps officer," and smuggling explosively formed penetrators (EFPs) to local militias.

Two separate mortar attacks, one allied with a car bomb, killed eight people in a disputed Baghdad neighbourhood on Saturday, security and hospital sources said.

In the first attack, a barrage of mortar rounds and an exploding car bomb struck a market in the Bayaa area in the southwestern corner of the capital, killing at least six people.

"We received six bodies and 34 wounded, including three women, from the incident in Bayaa," said an official at the Yarmuk hospital.

It added that five people were killed when troops called in an air strike after nine vehicles moved into the area following the arrest in an apparent attempt to resist the operation.

The Iraqi official disputed this version and said the cars hit in the air strike had been waiting to fill up with gas, a common pre-dawn scene in a city where shortages are common and lines often stretch for several blocks.

The military official added that several houses were destroyed and six vehicles incinerated, in the raid.

A local hospital official reported receiving three bodies and eight wounded people following the battle.

The United States has long accused Iran of supplying EFPs, sophisticated explosive devices that discharge a ball of molten metal capable of tearing through an armoured vehicle, to Shia militias.

The United States and Iran frequently accuse each other of fomenting violence in Iraq, but on Monday their respective ambassadors will hold landmark meetings in Baghdad aimed at slowing Iraq's spiralling mayhem.

Saturday's raids came one day after radical Shia cleric Moqtada al-Sadr reappeared from a four-month absence to deliver a Friday sermon calling for national reconciliation and the departure of US and British forces.

Sadr called on his forces to refrain from fighting the Iraqi Army and Iraqi police, but a few hours later Iraqi special forces with British support killed one of his senior commanders while trying to detain him at Basra checkpoint.

Sadr's well-armed but increasingly fractured Mahdi Army militia has largely cooperated with a three-month-old US-led security crackdown in the capital, but rogue elements continue to battle coalition and Iraqi forces.

Meanwhile, three US servicemen have died in a series of incidents across Iraq, the US military reported Saturday.

On Friday evening a roadside bomb killed a soldier northeast of the capital in Diyala province.

Another soldier was killed by small arms fire during a battle in the Baghdad area, also on Friday, and in the western province of al-Anbar a marine died in a non-combat incident.