"It will be helpful, it won't end the attacks," Paul Bremer, the US-occupation administrator in Baghdad said.
His was the first admission by a leading US official that the resistance attacks had wider support in Iraq.
The occupation forces have so far preferred to blame all attacks on a handful of loyalists of the ousted Saddam regime.
Bremer said the capture of Saddam would dash the hopes of those who still dreamed of the former Iraqi president staging a comeback.
"I think he is still in Iraq, he is still alive," Bremer said.
"We don’t have any immediate intelligence as to exactly where he is."
Bremer said he had ordered a thorough probe into Sunday's rocket attacks on the Baghdad hotel where US Deputy Defence Secretary Paul Wolfowitz was staying.
"I asked for a complete investigation into this and my security people are looking into it," he said.
"We have a major terrorist problem in Iraq. We are on front in the war on terrorism," Bremer claimed.