Ali Muhammad, an Iraqi journalist, told Aljazeera that up to 16 people had been killed in clashes between the police and guards at the al-Arab mosque in the southern city on Saturday night.
According to Muhammad, witnesses said Iraqi National Guards and policemen stormed the mosque after fighting in the area that had lasted for three hours.
"All those inside the mosque have been killed," said Muhammad.
It is unclear whether policemen were among the dead.
Sunni group's statement
A Sunni religious group, the Sunni Endowment, described the incident as police gunning down unarmed worshippers.
Police, however, said they were returning fire against gunmen.
Sunni Muslims accuse the Shia militias of infiltrating the Iraqi police and of carrying out killings against Sunni families.
"Only worshipers were killed in the mosque. They killed unarmed people inside the mosque"
Sunni Endowment statement
In a statement, the Sunni Endowment said: "We accuse the security forces in Basra for what happened.
"Only worshippers were killed in the mosque. They killed unarmed people inside the mosque."
But a police source rejected this account, saying police were fired on when they came to the mosque in the centre of the city.
A police source told Reuters that the police had received a tip that "terrorists" had taken refuge inside the mosque and police were fired on when they surrounded the building. The source said nine gunmen were killed and six arrested.
The violence came hours after a car bomb killed at least 28 people in Basra, challenging a state of emergency imposed by Nuri al-Maliki, the new Iraqi prime minister, aimed at cracking down on gangs, militias and feuding Shia factions threatening oil exports.
Also on Sunday, a senior police official said gunmen dragged 24 civilians out of their cars at a makeshift checkpoint in a town north of Baghdad and shot them "execution style".
The victims included students, children and elderly men, said the senior police official in Diyala province.
Protesters called for Samawa's
governor to step down
The attack took place in Udhaim, 120km north of Baghdad.
At least 13 Iraqis, including seven policemen, have been injured after security forces opened fire on protesters in Samawa, in southern Iraq, an Iraqi medical source says.
The protesters were demonstrating outside the office of the Muthanna governorate.
They called for the governor of the province to be sacked due to water shortages and an end to the domination by armed militias in the town.
Mass grave uncovered
Meanwhile, the Iraqi High Tribunal is exhuming bodies from mass graves as it prepares trials against members of the former Iraq government under Saddam Hussein over the suppression of a 1991 Shia uprising.
In a remote desert location southwest of Baghdad, investigators on Saturday were removing 28 skeletons poking through the sand, their skulls blindfolded with scarves, hands tied behind backs and bullet holes in their clothes.
Investigators have removed 28
skeletons from the site
The bodies, still clad in the clothes they were killed in, were placed in body bags for transportation to Baghdad for analysis in the forensic labs in support of the eventual case.
Raed al-Juhi, the chief investigating judge of the Iraqi High Tribunal, said: "There are 200 sites registered with the Ministry of Human Rights, witnesses led us to these sites."
Juhi declined to speculate on when the case of the 1991 uprising, suppressed by the former Iraqi government after its defeat in the first Gulf war, would come to trial.