Blackwater, a US security firm, has halted its operations in Iraq, ending a controversial chapter for the company whose guards shot dead several civilians in Baghdad in 2007.

Susan Ziadeh, an American embassy spokeswoman, said on Thursday "the task order for security protection operations held by Blackwater comes to an end today in Baghdad".

Triple Canopy, a Virginia-based private military company, will replace Blackwater, which operated to protect US government personnel in Iraq.

The US state department signed a contract reportedly worth nearly a billion dollars with Triple Canopy on March 31, 2009, after it refused to renew annual contracts for Blackwater.

Blackwater renamed itself Xe after the Iraqi government banned it in January over the killings in Baghdad's Nisr Square on September 16, 2007.

Its guards killed 17 civilians and wounded 20 others when they opened fire while escorting an American diplomatic convoy through the square, according to an Iraqi investigation.

US prosecutors sid 14 civilians were killed in the incident.

Five Blackwater guards pleaded not guilty to manslaughter charges, but the shooting focused a spotlight on the discreet and highly lucrative private security and military operations of private security operations in Iraq.

Lucrative contracts

Blackwater, headquartered in North Carolina, has been protecting US government personnel in Iraq since the 2003 invastion and has had around 1,000 staff in the country, making it among the largest security firms there.

The company's personnel were reported to earn as much as $1,000 a day while on duty in the region.

Many of Triple Canopy's guards are expected to be former Blackwater employees, but General Abdul Karim Khalaf said that former Blackwater guards would be denied work in Iraq.

"There is no way that former Blackwater guards will be allowed to return to Iraq with a different company," he said.

Falluja killings

Blackwater first came under scrutiny when four of its employees were killed by an angry mob in Falluja.

The crowd mutilated their bodies and strung them from a bridge.

The images were broadcast worldwide and led to a month-long assault on Falluja that left 36 US soldiers, 200 fighters and 600 civilians dead.

Foreign security teams assisting the US military in Iraq have long operated in a legal grey area, but under a military agreement signed with Washington last November, Baghdad won a concession to lift the immunity to prosecution previously extended to US security contractors, even though they work for the private sector.