Baghdad journalist Falah Khairi told Aljazeera a contingent of Iraqi police and US forces deployed at 3:00 am on Friday in Haifa Street.
They raided several homes and buildings and arrested a large number of people. All roads and bridges leading to the street were blocked.
Then, fierce fighting erupted between the contingent and an unidentified armed group, resulting in heavy damage to nearby buildings.
Khairi said the clashes started after Iraqi police and US led-forces blew up a car in the area fearing it was booby-trapped.
"But due to the violent confrontation, we have not got any information about the number of casualties," he added.
Earlier in the afternoon, a car bomber struck a major police checkpoint in central Baghdad killing at least 13 people and wounding 20 more, mainly policemen, Iraqi Health Ministry and government sources said.
Six police cars were driving towards the central Rashid Street on Friday when a car coming from Haifa Street drew up to them, said policeman Madhafar Ismail.
"When it reached them, he (the driver) blew himself up," Ismail said. "There was certainly a suicide bomber inside."
He said the blast took place at around 12:45 pm (0845 GMT) but did not have details of the casualties.
The blast sent a thick plume of smoke into the air from the east side of the Tigris River. Ambulances with sirens wailing rushed to the scene as US troops sealed off the area near Rashid Street.
A growing number of attacks are
targeting Iraqi security forces
A witness said shrapnel rained down on his stationary shop in the nearby Al-Mutanabbi Street.
"People coming from the blast location said that a car, a Chevrolet type, exploded," said Haqqi Ismail, 25. "Iraqi police and American soldiers are there now."
Security forces blocked off the area.
A government source told Reuters that he expected "huge" casualties from the explosion, adding police officers were among the dead.
The US military and Iraqi Interior Ministry said it had no immediate information.