A US military statement said a strike targeted an Iranian-linked commander believed to be smuggling weapons across the border from Iran, accused by the Americans of fuelling the sectarian conflict in Iraq.

US aircraft killed the insurgents and destroyed two houses after a heavy firefight near Baquba, 60 km north of Baghdad, during which rebels fired rocket-propelled grenades, it said.

Iraqi police spokesman Khudhayir al-Timimi said civilians were among the dead and wounded in a US air raid on Al-Jayzani village northwest of Baquba, which appeared to be part of the same military operation.

“Twenty-five people were killed and 40 others wounded, including women and children in the US air strike that targeted Al-Jayzani,” said Timimi.

An Iraqi defence ministry official earlier said at least 17 Iraqis were killed.