A missile strike by a U.S. helicopter in Baghdad's Sadr City killed four people Friday, marking a sharp escalation in the battle against a powerful Shiite militia.
Until the strike, only Iraqi security forces had been involved in a recent campaign in the neighbourhood targeting the Mahdi Army militia -- who are loyal to anti-American cleric Muqtada al-Sadr.
The U.S. has touted the offensive as a test of Iraq's ability to handle its own security operations.
But ground forces called for the strike after receiving small-arms fire while they were trying to clear a main supply route, U.S. military spokesman Lt. Col. Steve Stover said.
Another U.S. spokesman, Maj. Mark Cheadle, confirmed that U.S. troops were also now fighting militants on the ground in Sadr City.
U.S. officials said four militants were killed in the strike but Iraqi officials said the dead were civilians.
The Pentagon accuses the Mahdi Army of having links to Iran.
U.S. President George Bush, speaking at a White House news conference Friday, said the fighting marks a "defining moment in the history of Iraq."
"It's going to take awhile, but it's a necessary part of the development of a free society," he said.
Earlier Friday, a forced curfew was imposed on Baghdad following attacks on the U.S.-protected Green Zone. The Green Zone has been under heavy attack from extremists who continue to launch rockets and mortars.
Two rounds struck the nearby offices of Sunni Vice President Tariq al-Hashemi Friday, killing two guards and injuring four.
Meanwhile, in the southern city of Basra, U.S. forces also used air strikes to assist Iraqi forces fighting Shiite militias.
U.S. jets dropped bombs on a mortar team and a militia stronghold, British military spokesman Maj. Tom Holloway said Friday.
Prime Minister Nouri al-Maliki has said that the fighting in Basra is not directed at al-Sadr's movement but rather at criminal gangs.
Despite the claim, Sadrists say the U.S. and Iraqi forces have conducted raids and detentions -- neglecting a seven-month-old ceasefire.
Al-Sadr called for a diplomatic solution to the crisis on Thursday, demanding an end to the "shedding of Iraqi blood."
But the statement stopped short of ordering his Mahdi Army militia to halt attacks on the Green Zone or to stop fighting in Basra.
"It's probably going to take a few more days of both sides negotiating, talking, and probably some fighting in some areas before things are resolved one way or the other," ABC's Miguel Marquez told CTV's Canada AM on Friday.
"That's the big question, have things spiralled too far out of control to put it back together again?"
In total, 120 people, including two Americans, have been killed and 350 have been injured in fighting this week.
With files from The Associated Press
