The British army said the incident happenned on Thursday afternoon in the southern Iraqi town of Basra.

The two injured men suffered non-life-threatening shrapnel wounds in the explosion that occurred as the ambulance was on its way to a military hospital.

"This was a direct attack on a clearly marked ambulance without any justification whatsoever," said army spokesman Major Charlie Mayo.

He said the attack was carried out by "a small minority of those who do not want peace," adding that it would not deter occupation forces from working with the Iraqi people to achieve stability.

Resistance attacks

Basra has, on the whole, remained relatively calm since the war compared to US-controlled areas in and around Baghdad.

Before Thursday, there had been only one incident in which British soldiers were killed.

The death brings to seven the number of British servicemen killed in Iraq since major combat operations were declared over by George Bush on May 1.

At least 120 American troops have been killed over the same period.