Iraqi police said the news team was shot by US soldiers.
The US military said it was still investigating and refused to say what questions it was putting to cameraman Haidar Kadhim.
It would not say where in Baghdad he was held nor identify the unit holding him.
"Reuters demands the immediate release of Haidar Kadhim," Global Managing Editor David Schlesinger said.
"We fail to understand what reason there can be for his continued detention more than a day after he was the innocent victim of an incident in which his colleague was killed."
Lieutenant-Colonel Robert Whetstone, a military spokesman, said: "He is being questioned by our investigating officer."
Cameraman Walid Khalid, 35, was hit by a shot to the face and at least four to the chest as he drove to check a report from police sources of an incident involving police and armed men in the Hay al-Adil district, in the west of the city.
"A team from Reuters news agency was on assignment to cover the killing of two policemen in Hay al-Adil; US forces opened fire on the team from Reuters and killed Walid Khalid, who was shot in the head, and wounded Haidar Kadhim," an Interior Ministry official quoted the police incident report as saying.
"I heard shooting, looked up and saw an American sniper on the roof of the shopping centre," cameraman Kadhim, who was wounded in the back, told colleagues who arrived at the scene.
Kadhim, the only known witness, was later detained by US troops and was still in custody six hours later despite Reuters's requests that he be freed to receive medical attention. His precise whereabouts were not known.
Two Iraqi colleagues who arrived on the scene minutes after the shooting were briefly detained, then released.
The uncle (L) and father of Walid
Khalid cry over his his body
"They treated us like dogs. They made us, ... including Haidar who was wounded and asking for water, sit in the sun on the road," Reuters Television soundman Muhammad Idriss said.
Asked to comment on the incident, US spokesman Lieutenant- Colonel Steven Boylan said it was being investigated.
A US statement said: "Task Force Baghdad units responded to a terrorist attack on an Iraqi Police convoy around 11.20 am 28 August in central Baghdad, which killed and wounded several Iraqi Police.
"One civilian was killed and another was wounded by small- arms fire during the attack ... After discovering an abandoned car with explosives material, weapons and a cell phone, units began searching the area for the terror suspects who were believed to have fled on foot."
Reuters' Schlesinger said: "This tragic incident must immediately be investigated thoroughly and impartially.
"A brave journalist has lost his life and another has been wounded and detained when their only actions were as professionals reporting the facts and images of the war. We are deeply saddened at this loss."
Iraqis complain of frequent killings of civilians by US forces, most of which go unreported and are not investigated. American commanders say their troops are trained to be vigilant against bombers and to avoid firing on civilians.
Khalid (L) places a microphone on
Minister Jalil Shamari (file photo)
Reuters correspondent Michael Georgy, who arrived at the scene about an hour after the shooting, said the soundman's body was still in the driver's seat, the face covered by a cloth.
Entry and exit wounds could be seen on the face indicating shots from the victim's right. There were several bullet holes in the windscreen and at least four wounds in the chest.
His US military and Reuters press cards, clipped to his shirt, were caked in blood. In one, there were two bullet holes.
To the right of the scene, a US soldier, apparently a sniper, was posted on the roof of a shopping centre.
A British security adviser working for Reuters said it seemed that high-velocity rounds had been fired at the car from roughly the direction of that building.
The car, an ordinary, white four-door passenger vehicle, was heading down an offramp, about 200 metres from a main road.
US armoured vehicles blocked off the scene. After a brief inspection of the car, they allowed Reuters staff and the dead man's family to have it towed away.
One soldier said there were no suspicious items in the car. Colleagues and relatives were handed a military body bag to remove the corpse.
A US officer said: "They drove into fighting."
As Walid's tearful relatives inspected the body at the scene, a US soldier said: "Don't bother. It's not worth it."
A few other soldiers joked among themselves, just a few metres from the body.
Reuters's al-Mashhadani is still
being held by US forces
Walid was a jovial character loved by colleagues with whom he had worked for two years. He leaves a 7-year-old daughter and his wife, who is four months pregnant.
Two Reuters cameramen have been killed by US troops in Iraq since the US invasion in 2003. A third was shot dead by a sniper in Ramadi last November in circumstances for which Reuters is still seeking an explanation from US forces.
Reuters's cameraman in the city of Ramadi, Ali al-Mashhadani, was arrested by US forces three weeks ago and is being held without charge in Abu Ghraib prison. US military officials say he will face a judicial hearing as soon as Monday, but have still given no access to the journalist or said what he is accused of.