US troops have arrested what they claim is an Iran-linked financier of Iraqi extremists in Baghdad.

The arrest of the man described by the US as a key financier comes one day after US troops killed up to five militants and arrested 13 arms smugglers in a sweep on Baghdad's Shia Sadr City area.

The suspect, whose identity has not been released, is believed to be a special groups leader for the Bayaa neighbourhood in the western part of the Iraqi capital.

The US military claims that such special groups of Iraqi extremists are trained, armed and funded by Iran's elite Quds Force, a unit of the Islamic republic's Revolutionary Guard.

The military accuses these groups of directing attacks against US-led troops and inciting sectarian violence in Iraq.

Iran has strenuously denied the accusations.