US troops killed an estimated 26 militants during fierce fighting in Baghdad's Sadr City early on Saturday in one of the bloodiest clashes in the Shi'ite slum since the US-led invasion of Iraq in 2003.
The US military said in a statement that American forces staged two separate raids into Sadr City targeting militants suspected of close ties to "Iranian terror networks" and who were responsible for bringing Iranian weapons into Iraq.
The statement said US soldiers faced "significant" resistance during the pre-dawn raids, including roadside bomb attacks as well as fire from rocket-propelled grenades and light weapons.
There were no US casualties, the statement added.
Residents said US attack helicopters fired missiles at targets in the densely-populated slum of two million people in northeastern Baghdad. The military said armored vehicles fired on four cars.
The military said 17 militants were detained in the raids.
Sadr City is the stronghold of anti-American Shi'ite cleric Moqtada al-Sadr, who has demanded US forces leave Iraq.
Washington blames rogue elements of Sadr's powerful Mehdi Army militia of using technologically advanced roadside bombs, which are made from components smuggled in from Iran, to target US troops.