The fighting broke out shortly after midnight when US forces rolled into the city, and resumed later in the morning as people were evacuating the dead and wounded, according to a local police officer who asked not to be named.

Dr Aziz al-Ghanimi of the Al-Hussein General Hospital confirmed there had been fighting and said the hospital had received nine bodies and admitted 23 wounded people.

The US military could not immediately comment on the incident.

At least three of the dead were Mahdi Army fighters, according to Razak al-Musawi, a local spokesman for the political movement of radical Shia cleric Moqtada al-Sadr, which commands the militia.

"The Americans were looking for a well-known member of the Mahdi Army named Hamza Matrud. There were three people killed and seven wounded from the Mahdi Army," he said.

Cities in south-central Iraq have seen several running battles in recent months between rival Shia militias and US and Iraqi forces.

Meanwhile, nine more US troops have died in Iraq, including three marines and a sailor killed in a day of fighting in the restive province of Diyala north of the capital, the military said on Thursday. Another American soldier was killed in combat in Iraq's volatile Diyala province northeast of Baghdad on Thursday, the US military said on Friday.

His death comes two days after four US troops -- three marines and a sailor -- were killed in the same province, where thousands of US and Iraqi troops are pressing a month-long assault on alleged al-Qaeda strongholds.

The four were killed on Tuesday while fighting in the second most dangerous province in Iraq after Baghdad. Ten thousand US and Iraqi troops have been carrying out a major assault on suspected al-Qaeda strongholds in Diyala.

On the same day another soldier was killed by a roadside bomb in the capital, the military said in a separate statement.

Another soldier was shot dead in south Baghdad on Wednesday, and earlier this week a soldier and a marine died of non-battle related causes in separate incidents, the military said.

The latest fatalities took the US military's losses in Iraq since the March 2003 invasion to 3,642, according to an AFP count based on Pentagon figures.

Earlier on Thursday the number-two US commander in Iraq told reporters that US casualties seemed to be declining since May, calling it an "initial positive sign" that a five-month-old security plan was showing results.

"We topped out in May in casualties and we kind of predicted that because we went into areas that we had not been in for a long time and they were safe havens established by the extremists," said Lieutenant General Raymond Odierno. "Going into these areas we knew it would be tough in the beginning. We've now taken control of these areas," he added.

In late June thousands of US and Iraqi soldiers poured into Diyala in an assault known as Operation Arrowhead Ripper aimed at dislodging al-Qaeda insurgents from the provincial capital of Baquba.

But soon after the operation was launched Odierno said 80 percent of the senior al-Qaeda leadership in the city had fled ahead of the assault, leaving behind a labyrinth of booby-trapped structures and buried bombs.