The affair is a test of the new warmth in relations between Baghdad and Tehran since Iranian-friendly Shia took control in Iraq after US forces overthrew Saddam Hussein, a Sunni.
Iraq's foreign minister called in the Iranian envoy on Tuesday to seek the release of eight or nine coastguards Iraq said were seized after an exchange of fire involving suspected oil smugglers on their long-disputed border along the Shatt al-Arab estuary.
Iran's embassy in Baghdad denied all knowledge of the incident, which Iraqi officials, in confusing statements, said happened on either Saturday or Sunday and involved up to 10 coastguards.
Mohammed al-Waili, the regional governor in Basra, said in an interview with Aljazeera on Tuesday evening that one Iraqi coast guard had been killed and eight kidnapped, but said later he had been unable to confirm the death.
"He has serious injuries and there are reports that he has died, but I have not been able to verify that," he told Al Arabiya television.
"Eight men from the coastguard and an officer were taken prisoner by Iranian coastguards"
Spokesperson for Ibrahim
Spokesmen for the central government in Baghdad were more restrained and a government spokeswoman said she did not know of any casualty.
Hoshiyar Zebari, the Iraqi foreign minister was raising the issue in a meeting with Hasan Kazemi-Qomi, the Iranian charge d'affaires, an Iraqi foreign ministry spokesman said. One of the main reasons for calling the meeting was to discuss the incident, he said.
But Kazemi-Qomi said through a spokeswoman: "The reports of this incident are untrue." He made no further comment.
The Iranian foreign ministry in Tehran said only that reports of the incident were "incorrect", the Iranian ISNA students' news agency reported.
A spokeswoman for Ibrahim al-Jaafari, the Iraqi prime minister, said: "Eight men from the coastguard and an officer were taken prisoner by Iranian coastguards."
The Basra governor told journalists that Iraqi coastguards had boarded an Iranian-skippered ship suspected of smuggling oil in Iraqi waters when they were overpowered by an Iranian patrol.
"We ask from the Iranian side to keep these troops safe," he said.
Smuggling is a serious problem for the Iraqi government, which heavily subsidises fuel and sees some of it driven or shipped abroad to be sold for big profits in neighbouring countries.
Iraq and Iran have a long history of disputes along their tidal border. Iran seized three British naval patrol boats in the same area on its border with Iraq in June 2004, at a time when British forces were responsible for policing the border.
Ibrahim al-Jaafari, a Shia,
enjoys warm ties with Iran
But relations between Baghdad and Tehran are at their warmest in decades, with Shia leaders in power in Iraq since the fall of Saddam's secular government.
Many of the new leaders were refugees in Iran, after Saddam had thrown them across the border claiming that they were originally Iranians and they were plotting with Iran against Iraq.
Al-Jaafari, whose al-Dawa party was formed and financed by Iran, has visited Tehran and his government's close relations with Iran have alarmed the United States, which is at daggers drawn with Tehran, most recently over accusations that it is developing nuclear weapons.