They said the aircraft came down in the Tigris which flows through the city, about 390km northwest of the capital Baghdad.
US troops sealed off the area after the crash which occurred about 18:40 local time (1540 GMT).
It was not immediately clear if there were casualties or whether the helicopter had come under fire. Both crew members are missing and a search operation is underway.
The OH-58 Kiowa Warrior, an armed reconnaissance helicopter, was involved in a search and rescue mission for a US soldier reported missing when the boat he was in capsized earlier on Sunday.
The soldier was on a river patrol with three other soldiers and some Iraqi policemen, said a spokeswoman at the military command in Baghdad.
The other three soldiers were safe, but two Iraqi police officers and an Iraqi translator were reported dead, said the spokeswoman, speaking on condition of anonymity.
Major helicopter crashes in recent months:
• 2 Nov - Chinook shot down near Falluja. Sixteen US troops killed and 21 others on board hurt.
• 7 Nov - Black Hawk comes down near Tikrit, probably hit by a rocket-propelled grenade. All six people aboard killed.
• 15 Nov - Two Black Hawks collide under fire in Mosul, killing 17 soldiers. It remains the bloodiest single incident for US forces since they invaded Iraq on 20 March.
• 2 Jan - Kiowa shot down in central Iraq, killing one pilot and injuring another.
• 8 Jan - Black Hawk apparently shot down near Falluja, killing all nine soldiers on board.
• 23 Jan - Kiowa downed outside Qayara, near Mosul. Both crew
died. Military unclear about what caused crash.
Second this week
On Friday, two US pilots died when their Kiowa chopper came down near the town of Qayara in northern Iraq.
The US military has not determined the cause of that crash, but said an accompanying helicopter did not report hostile fire.
A series of helicopter crashes over the last three months, some under fire from insurgents fighting US troops, has helped swell the number of US combat casualties since the invasion of Iraq in March last year.