CBS News said on Monday that two of its journalists were missing in Basra, but it did not identify them.
The office of Muqtada al-Sadr, leader of Mahdi Army, the Shia armed group, has distanced itself from the incident.
"We condemn the kidnappings of journalists and we demand the release of the British journalist and the Iraqi interpreter," a statement released by the office read.
"Our office condemns such events and we call on security forces to help in their release."
Witnesses said the Palace Sultan hotel was cordoned off on Tuesday as police searched for clues.
Meanwhile, in Baghdad, the body of Hisham Michwet, a local journalist, was found two days after being kidnapped, Iraq's Journalistic Freedoms Observatory said in a statement.
At least 208 journalists and media assistants have been killed since the US-led invasion of Iraq in March 2003, according to Paris-based media watchdog Reporters Without Borders.
In other news, the US military announced on Tuesday the launch of an operation against al-Qaeda in Iraq fighters in Mosul, 390km north of Baghdad.
More than 1,000 US and Iraqi soldiers are to take part in the operation in Ninawa, the northern province whose capital is Mosul.
|The bodies of 13 men were found in a mass|
grave in Muqdadiya on Tuesday [AFP]
Elsewhere, Major-General Ghanim al-Qureishi, the police chief of Diyala province, is likely to face interrogation on accusations of involvement in the kidnapping of two women some days ago.
Residents have been demonstrating in the streets while the province's awakening council suspended operations earlier in the week in protest, calling for the removal of al-Qureishi.
Also in Diyala on Tuesday, US forces found the bodies of 13 men in a mass grave in Muqdadiya, a town 90km northeast of Baghdad, police said.
Baghdad too was the scene of violence: two people were killed and eight others were wounded when four mortar bombs landed in a residential area in Doura district, police said.
Against this backdrop of continued unrest, UN agencies and other aid groups launched an appeal on Tuesday for $265 million to provide urgent humanitarian relief to Iraqis over the next year.
The appeal, which brings together 14 UN agencies and 10 non-government organisations, is aimed at providing emergency aid in areas such as food, health, education, water and sanitation, housing and shelter, and protection, the UN Assistance Mission for Iraq said as it announced the effort.
David Shearer, the UN humanitarian co-ordinator for Iraq, said: "We have to respond rapidly those people who need support."
The UN said an estimated four million people need basic food assistance and more than two million people inside Iraq are believed to have been displaced from their homes.