Those arrested in Jabur are believed to have links to "terrorist activity" and the al-Qaeda network and have been "detained without incident", the US military said on Saturday.
"The group has been reported to be planning and conducting training for future attacks like the attack in Mahmudiya on July 17 that killed 42 and injured 90 innocent Iraqis," the US military statement said.
Also on Saturday, two bombs killed six people and wounded 11 in more violence in Baghdad, Iraqi police said, while two US soldiers were killed by a roadside bomb south of Baghdad.
US and Iraqi forces are implementing a sweep in the Iraqi capital street by street, and aim to take back control of Baghdad from fighters amid fears that the country may be on the brink of civil war.
Thousands of reinforcements have been drafted in to areas such as Dura in the south of the city and are setting up cordons around entire neighbourhoods, before proceeding to disarm residents through house to house searches.
"This will be the defining battle of this particular campaign. We've got to take back Baghdad"
Pete Chiarelli, commander,
US-led Multinational Corps Iraq
Michael Beech, the colonel leading the US 4th Infantry Brigade, told reporters that on Tuesday morning that Iraqi police commandos had set up a blockade around the area, while US and Iraqi army brigades began house-to-house searches of three districts of between 1,300 and 1,500 homes.
The searches, he said, led to 38 arrests, including those of three "foreign fighters". More than 20 illegal weapons, which include machine guns and a rocket launcher, were seized, as were explosives and CD video disks extolling Osama bin Laden and Hezbollah.
Analysts say the Iraqi government and its US ally face an enormous challenge to restore their authority in an increasingly divided and radicalised city, the scene of more than 50 murders a day.
But commanders in Dura say they have made a start and have proved their tactics can work.
US forces and Iraqi police are moving on to neighbouring areas, followed by refuse collection trucks and officers sent to discuss economic and social regeneration projects with local sheikhs and imams.
Beech said: "The most important part is yet to be conducted. Overlaid on top of this military component is the economic and essential services component."
Car bombs are a regular
occurrence in Baghdad
The operation is laborious in a city with a population of between six and seven million, but US commanders feel it is necessary to prevent civil war between rival Sunni and Shia groups.
Lieutenant-General Pete Chiarelli, commander of the US-led Multinational Corps Iraq, in an interview this week with the television network ABC, said: "This will be the defining battle of this particular campaign. We've got to take back Baghdad."
However, Anthony Cordesman of the Centre for Strategic and International Studies (CSIS) in Washington said Baghdad's militias and death squads could hide their weapons and melt into the civilian population to wait out the joint US-Iraqi operation.
"They can wait days, weeks or months, lashing out after the US has claimed to have secured a given area," he wrote.
"If the Maliki government does not make much progress by this fall, the government will probably lose credibility"
Anthony Cordesman of CSIS
Observers say success depends on the ability of the Iraqi government to build a dialogue both with the Shia militias loyal to it and the Sunni fighters inspired by Islamism or loyal to Saddam Hussein.
Cordesman wrote: "If the government does not make much progress by this fall, the government will probably lose credibility. Trust and hope will have eroded too far, and the US-led security operation will be seen as another occupation - no matter how well it is run.
"In this, US policy faces a similar threat as it did in a previous conflict, one in which is was eventually defeated. Like Vietnam, the US keeps waiting for the political climate to decisively change local attitudes and provide support for the government."
Meanwhile, three people were killed in a bomb blast in the city of Basra, 550km (340 miles) south of Baghdad, police sources said. Iraqiya state television said the bomb was inside an electronics shop in the mainly Shia city.
Police said they had found the bodies of two civilians shot in the head and chest in Balad, 80km north of Baghdad.
Gunmen killed police Captain Nuri Juad in the al-Mualemin district of Baquba, a town 65km north of Baghdad, police said.
Seven policemen were wounded in a roadside bomb targeting their patrol in Baquba, police said.