At least ten people have been killed in Iraq's Sadr City.
More than 40 more were wounded in fighting between US air and ground troops and militants early this morning.
The US military said the firefight broke out when ground forces came under attack during an operation aimed at capturing an individual from a group involved in kidnappings.
US forces launched a raid in the impoverished neighbourhood which is loyal to anti-US cleric Muqtada al-Sadr, according to security officials.
A spokesperson for the US military said there were no civilian casualities, however, Sadr City hospitals said the dead included a child and a girl.
In a separate statement the US military said the operation was 'intelligence-driven'.
US forces have regularly targeted Sadr's Mahdi Army militia which it accuses of being involved in sectarian killings of Iraqi Sunni Arabs.
In August Sadr declared a six-month freeze on the activities of the militia, including a halt to attacks on US-led coalition troops in Iraq.
The US military has welcomed the freeze but continues to target fighters who it says have broken away from the main force of the Mahdi Army and formed special groups allegedly aided by Iranian groups.
