The four contractors were killed when their SUVs were set on fire in the Sunni Triangle city, 35 miles west of Baghdad, where some of the worst insurgent violence has taken place since the war began.
Two of the bodies were hung from a bridge over the Euphrates River, while another body was hooked to a car and dragged down the street.
“The people of Fallujah hanged some of the bodies on the old bridge like slaughtered sheep,” Abdul Aziz Mohammed, a local resident said.
Under the bodies, a man held a sign with a skull and crossbones that read, “Fallujah is the cemetery for Americans,” the Associated Press reported.
Crowds chanted “Fallujah is the graveyard of Americans,” and “We sacrifice our blood and souls for Islam.”
“This is the fate of all Americans who come to Fallujah,” said Mohammad Nafik, who was part of the crowd.
U.S. officials in Washington said the four people killed were contractors working with the U.S.-led coalition. They did not, however, say what the group was doing in the city.
By midday, U.S. State Department officials said three of the four contractors had been identified as Americans. Video footage from Associated Press Television News showed an American passport near the body with a U.S. Defense Department identification card nearby.
U.S. soldiers or Iraqi police were not seen in the area for hours after the violence occurred, but a U.S. fighter plane flew overhead, breaking up the crowd.
Meanwhile, five members of the 1st Infantry Division were killed when their vehicle hit a roadside bomb while traveling in Malahama, 12 miles from the incident in Fallujah.
White House officials called the attacks “horrific,” but said that the U.S. will “stay the course” in Iraq.
White House spokesman Scott McClellan told reporters that Wednesday’s violence should not be compared to the events in Somalia in 1993 when a mob dragged the body of a U.S. soldier through the streets.
”There are terrorists, there are some remnants of the former regime that are enemies of freedom and enemies of democracy, but democracy is taking root and we are making important progress,” McClellan said. ”We will not turn back from that effort.”
With less than 100 days remaining before U.S. authorities hand over power to an Iraqi government, there has been a rise in insurgent attacks against foreign civilians in the past few weeks.
In March, 12 foreigners were killed in drive-by shootings or other attacks. Most recently, two security guards, a Briton and a Canadian, were shot and killed Sunday in Mosul.