The Foreign Office memo, excerpts of which were published in The Sunday Times on Saturday, condemned the way US forces quelled rebellions in some Iraqi cities last month and the high Iraqi toll left in their wake.
Drawn up for the advice of top government officials, the six-page document, titled Iraq: The Medium Term, also highlighted the abuse of Iraqi prisoners by US troops had damaged the occupying forces' "moral authority".
"We should not underestimate the present difficulties," read the document drafted by the Foreign Office's Iraq section in May.
"Heavy-handed US tactics in Falluja and Najaf some weeks ago have fuelled both Sunni and Shia opposition to the coalition, and lost us much public support inside Iraq," it stated under the heading Problems.
"Heavy-handed US tactics in Falluja and Najaf some weeks ago have fuelled both Sunni and Shia opposition to the coalition, and lost us much public support inside Iraq"
British Foreign Office memo
The document's content is in sharp contrast to the public show of agreement between US and UK leaders on progress in Iraq.
"The scandal of the treatment of detainees at Abu Ghraib has sapped the moral authority of the coalition, both inside Iraq and internationally," the memo argued.
The memo pointed out "the need to redouble our efforts to ensure a sensible and sensitive US approach to military operations".
Last week, the leader of the UK's main opposition Conservative party, Michael Howard, accused Prime Minister Tony Blair of a "serious lack of candour" towards the administration of US President George Bush over Iraq.
However, Blair responded by telling his cabinet any open disagreement would imperil the morale of British troops.