Thursday's hostage rescue occurred in two Sunni villages near Khan Bani Saad, 40km northeast of Baghdad, the US military said.
Iraqi police said the trouble started when dozens of armed men, some of them wearing military uniforms, raided the villages and abducted 10 young men.
Village leaders and clerics alerted police and US soldiers, who rushed to the scene, clashed with the men and rescued seven of the hostages, police said.
Three others were missing and presumed taken away by armed men, they said.
US troops killed one kidnapper and wounded another, said Lieutenant-Colonel Thomas Fisher, commander of the 1st Battalion, 68th Armor.
Some of the hostages had been severely beaten, he told Associated Press TV News.
More than 30 people were taken into custody, Iraqi police said, and interrogators were trying to determine their identities.
Some armed men told police they belonged to the militia loyal to radical Shia cleric Muqtada al-Sadr, Iraqi authorities said.
Increase in kidnappings
A Lebanese businessmen, Carlo Daccache, was snatched on Friday in Baghdad by unidentified armed men, a Lebanese official said.
The men were dressed in police uniforms as they kidnapped Daccache, the source said.
The Lebanese foreign ministry has contacted the Iraqi authorities to try to secure the release of Daccache, the source said.
Sectarian tensions have led to a
rise in violence against civilians
Kidnappings are believed to have risen steadily since the US-led invasion of 2003.
A study by the Brookings Institution estimated that 30 to 40 Iraqis were kidnapped a day in the Baghdad area during March, compared with two a day in the capital in January 2004.
With the rise in sectarian tensions, much of the violence has shifted from Sunni insurgent strongholds such as the Anbar province to Baghdad and other areas with a mixed population.
The shift has affected civilians, many of whom have been attacked simply because of their religious affiliation.
According to the health ministry, 952 people were killed nationwide last month in "terrorist" violence, among them 686 civilians.
By comparison, ministry figures stated that 548 civilians were killed nationwide in January, 545 in February, and 769 in March.
Iraq's president, Jalal Talabani, has appealed to clerics to condemn sectarian violence, which has raised fears of civil war.
US military deaths
The US command also announced the death of eight American soldiers, five of whom died in situations unrelated to Iraqi violence.
Three of the soldiers were killed on Thursday when roadside bombs hit two US Army convoys southwest of Baghdad, the military said.
The US command also announced that a US soldier died on Tuesday from non-combat related wounds.
In addition, four US marines died on Thursday when their tank rolled off a bridge into a canal and they drowned, the military said.
The accident happened near Karmah, 80km west of Baghdad in Anbar Province.
The eight deaths raised to 2,434 the number of members of the US military who have died since the Iraq war began in March 2003, according to an Associated Press count.
In other violence on Thursday, according to the police:
Women mourn over the coffin of
al-Shimri during her funeral
At least 14 people were killed in Baghdad, including five municipal street cleaners in an explosion.
A Shia professor, Widad al-Shimri, and her seven-year-old daughter were slain as they drove through Baquba.
A professor of Islamic law, Khalaf al-Jumaili, was shot dead after assailants stopped his car in Falluja.
One police officer was killed when armed men fired on a police station in Kirkuk.
Police killed a man who tried to plant a bomb under the car of Baquba's mayor.