Al-Darraji's convoy was attacked in a drive-by shooting in the mostly Shia area of Habibiyah.
He had been involved in negotiations with US and Iraqi government officials seeking to persuade the Shia militias that dominate the sprawling slum to pull their fighters off the streets.
Earlier in the day, a car bomb exploded next to a bus carrying state employees in Iskandiriya, south of Baghdad, killing four people and wounding 24, a police source said.
The blast from a parked car hit the bus carrying workers for a state mechanical industry company, police said.
Two days ago a senior executive in the company was killed by gunmen in the town, 40km from the capital.
surfdog1958, Baton Rouge, USA
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The attack will deal a blow to attempts by the Iraqi government to revitalise the country's near-dormant industrial sector.
Police said the blast occurred outside the Mechanical Industrial Development vehicle concern, one of the few factories still operating in Iraq, at about 8:15am (0515 GMT) as workers were arriving for the morning shift.
Iskandiriya has a number of factories but many are closed or operating at minimum capacity.
The US military said the three soldiers were killed while nine were injured in Diyala province, where reinforcements were sent this week as part of a US troop "surge" to quell violence in Baghdad and surrounding areas.
The deaths brought to 3,203 the US military's losses in Iraq since the invasion, according to an AFP count based on Pentagon figures.
US and Iraqi forces are one month into a crackdown in the capital, but US commanders have said that some fighters are regrouping and moving out of Baghdad, intensifying their attacks in the surrounding area.
The area immediately south of Baghdad, with a mixed population of Sunni Arabs and Shias, is one of many in Iraq that has seen relentless violence.
Major General William Caldwell said on Wednesday murders and executions in the capital had been halved in the past month, but that "sensational" car bombs blamed on al-Qaeda and other Sunni Arab armed groups had spiked in February.
He said US forces were focusing their efforts on finding car bomb factories believed to be on the outskirts of Baghdad and in the beltway around it.
|Caldwell said killings and attacks in Baghdad|
have slumped but car bombs are spiking [AFP]
A Pentagon report released on Wednesday said Iraq had faced the maximum number of attacks since the invasion to topple Saddam Hussein, the former president, during the last quarter of 2006.
The report said: "Although most attacks continue to be directed against coalition forces, Iraqi civilians suffer the vast majority of the casualties."
A chart showed a surge in sectarian incidents between September and December with murders spiking to about 1,300 in December alone, from less than 100 in January 2006.
During the last three months of the year, Baghdad experienced a record 45 attacks a day, it said.
US military reports losses
Four US soldiers were killed in eastern Baghdad on Thursday when a roadside bomb exploded near their vehicles, the US military said.
The military had earlier reported that three other soldiers had died on Wednesday, two in blasts and one hit by small-arms fire in Diyala province.
On Thursday US soldiers also killed an Iraqi soldier and wounded three more during a raid on an alleged an al-Qaeda network in the northern city of Mosul, the military said.
The incident occurred when US-led forces came under small-arms fire during the raid.
A military statement said: "Coalition forces returned fire, killing one and wounding three others. Coalition forces later identified the armed men as Iraqi army soldiers.
It said the incident is being investigated.