Officials in London denied initial reports that a British diplomatic convoy had come under attack.
Another report, citing a British diplomat, said four American security guards were killed in Wednesday's bomb attack which targeted a US diplomatic convoy.
There were "no diplomats" among the casualties, the diplomat said.
"The four Americans who have been killed were all in the front car" leading the convoy, he is quoted as saying.
Iraqi police Captain Mushtaq Talib said four people were killed in the blast and that it struck a British diplomatic convoy.
Talib said the victims' nationalities were not known.
But the Foreign Office in London challenged the police report.
"It wasn't a diplomatic convoy, and no British consulate or government staff were involved," said a spokesman, on
condition of anonymity in line with government policy.
"The exact circumstances of the incident are being investigated," the spokesman said.
Some 8500 British troops are
currently deployed in Basra
In Basra, British spokesman Darren Moss confirmed the bombing but said no military forces were targeted.
He added that "the casualties have been evacuated to a medical centre" but gave no further details.
The British Ministry of Defence confirmed it was investigating the incident and "that no British forces or other multinational forces were involved", according to a spokesman.
An AP Television News videotape showed an overturned white four-wheel-drive vehicle in a ravine next to a busy highway.
Six British Army Land Rovers, together with Iraqi police cars and two civilian ambulances, were parked nearby.
British soldiers were seen loading a body from the overturned vehicle into a military ambulance.
On 30 July, two Britons, who worked for the security firm Control Risks Group, were killed when a roadside bomb exploded alongside a British diplomatic convoy in Basra.
Two British soldiers died on Monday in a roadside bombing west of Basra.
Southern Iraq, where some 8500 British troops are deployed, has been mostly calm since US and British forces invaded Iraq two and a half years ago.