The Iraqi Prime Minister, Iyad Allawi, has threatened military action unless the rebel-held city of Fallujah hands over foreign militants led by a suspected al-Qaeda ally.
Abu Musab al-Zarqawi is said to be based in Fallujah.
Mr Allawi's comments to Iraq's interim national council came as al-Zarqawi's group is reported to have beheaded two Iraqi intelligence officers and posted a video of the killings on the Internet.
The two men said in the video they were captured in a militant stronghold in Baghdad on 28 September.
Elsewhere in Iraq, two US soldiers were killed and five were wounded in a suicide car bomb attack against their convoy in the northern Iraqi city of Mosul.
Hundreds of bodies found in Iraq riverbed
Meanwhile, hundreds of bodies believed to be those of Kurds have been found buried in a dry riverbed near Mosul in northern Iraq.
US-led investigators who have located nine trenches in Hatra are carrying out scientific tests which they believe will help convict Saddam Hussein of crimes against humanity.
The bodies include those of unborn babies and very young children.
The victims are believed to be Kurds killed in the late 1980s whose bodies were buried after being summarily shot dead.
Saddam in hernia operation
Elsewhere, it has been revealed that Saddam Hussein has had an operation to treat a hernia.
American officials said the deposed president had the procedure under tight security two weeks ago at a hospital inside Baghdad's heavily fortified Green Zone.
An Iraqi minister said Saddam, who was captured by American forces last December, was now in good health.
