The deadly incident occurred in the same neighborhood where, just 12 hours earlier, a suicide car bomb killed at least ten people, including the driver, at a nearby police station.
At least one Iraqi died and seven others were wounded in the fighting, staff at a local hospital told press agencies Friday morning.
The U.S. military said troops of the 1st Armored Division riding in three Humvees were ambushed around 8 p.m. Thursday while conducting a routine patrol in Sadr City.
However, local Shiite residents said U.S. soldiers instigated the gunfight when they approached the headquarters of the radical Shiite cleric, Muqtada al-Sadr, who has publicly opposed the continuing presence of U.S. forces.
An aide to al-Sadr, Sheik Abdel-Hadi al-Daraji, blamed the U.S. soldiers for the deadly clash, saying they opened fire first on Iraqis guarding the cleric’s office.
U.S. Army spokesman Lt. Col. George Krivo would not comment to new agencies whether the soldiers were nearing al-Sadr’s headquarters when the gunfight started.
Krivo said a group of civilians met up with the soldiers, telling them they needed to show them something “important.” When the soldiers left their vehicles, they were attacked with guns, rocket-fired grenades and makeshift explosives, he said.
The fighting Thursday night heightened tensions between the occupation forces and the country’s Shiite Muslim religious majority.
Following Friday morning’s prayers and sermon, about 10,000 Iraqi Shiites marched through the streets of Sadr City to denounce the United States for “terrorism.” Mourners held a funeral procession for the two Iraqis they said died in fighting with the American troops.
“America claims to be the pioneer of freedom and democracy, but it resembles, or indeed is, a terror organization,” al-Daraji told the procession. “The Americans may have forgotten that the real power rests with God and not with the wretched America.”
Krivo said American officials were engaged in an “ongoing dialogue with Shiite officials” to quell the mounting tensions in Sadr City, but added the U.S. military would not change its policy of patrolling the predominantly Shiite district.