Shopkeepers in the neighbourhood grabbed their guns and returned fire on three cars from which armed men were spraying their premises with bullets, interim Defence and Interior Ministry officials said.
Three armed men were killed and another three arrested, along with six civilians injured, in the sudden clash near the Shia al-Sadr mosque.
In Samarra, a unit from the Iraqi Ministry of Interior 1st Police Commando Battalion was attacked as they conducted a raid on a camp thought to house anti-US fighters near Lake Tharthar at about 11am (0800 GMT).
At least seven Iraqi commandos died during the raid with the backing of US troops, the US military said in a statement.
Six other commandos were wounded, the military added.
|Violence continues to sweep Iraq|
An undetermined number of anti-US fighters were killed, the statement said, adding that there were no US military casualties.
Elsewhere, an Iraqi army general died of his wounds suffered in an attack on Sunday and seven bodies of executed Iraqi soldiers were found in the north and south, said police sources.
Meanwhile, Iraqi police seized last week 30 men involved in three beheadings, the rape and murder of three women and the murders of 40 other people, General Adil Mulan said on Tuesday.
The new spate of violence came as as Shia and Kurdish leaders wrangled over portfolios in forming the new government.
Iraq's Shia majority will take 16 to 17 ministries in the next government, the Kurds will hold seven to eight and the Sunni community will be awarded four to six, Shia negotiator Mariam Rayis said.
Christian and Turkmen minorities would receive one ministry each, she added.
Talks could wrap up on Wednesday and a session of parliament to reveal the government lineup could convene as soon as Thursday or Saturday, the Shia side said.
"We hope it would be Thursday but the limit for how long this can drag on is the end of the month," Shia prime ministerial candidate Ibrahim al-Jafari said on state-owned Al-Iraqiya television.
A Kurdish source gave near matching accounts of the next government's shape, although they suggested the parliament might not convene until next week.
The Shia majority will take the Interior and Finance Ministries, along with the cabinet post of national security adviser, said Rayis, a negotiator with the United Iraqi Alliance, which won 146 seats in the 275-member parliament.
It is not yet known whether Allawi
will join the new government
The second-placed Kurds, with 77 seats, will head up the Foreign Ministry and probably the Oil Ministry, Rayis said, echoing similar reports from a Kurdish source.
Other posts that were locked up for the Kurds included the presidency, to be held by Jalal Talabani, and the post of deputy prime minister, the source said.
One complication that could change the cabinet makeup is whether outgoing interim Prime Minister Iyad Allawi decides to join the government, the Kurdish source said.
Rayis said she thought it was doubtful that Allawi or his followers would join the government.
Al-Mutamar, the newspaper of Shia politician Ahmad Chalabi, said outgoing Sunni president Ghazi al-Yawir would be the parliament's new speaker and fellow Sunni politician Hajim al-Hasani would serve as vice-president.