"The troops were fired on by wanted persons, forcing troops to return fire ...," Major General Mohammed al-Askari, a defence ministry spokesman, said.
Maytham Lafta, a local official, said at least 10 "innocent people'' were killed, including two women.
A provincial police official, speaking on condition of anonymity because he was not
authorised to release the information, also said 10 people were killed.
A US military statement said security forces detained 12 people believed to be members of Kateb Hezbollah.
In a separate incident on Friday, a bombing killed at least six Shia pilgrims in Kufa, south of Baghdad.
Red Caps killing
In yet another development, eight Iraqis were arrested over the killings of six British military police officers in a remote town in Iraq in 2003, the UK defence ministry said on Friday.
The six officers, members of a unit known as the Red Caps, died in June 2003 in Majjar when apparently angry residents stormed a police station.
The British military said at the time that the deaths stemmed from a misunderstanding between troops and residents over weapons searches.
But a defence ministry spokesman indicated on Friday that there was enough evidence to put on trial the eight suspects currently in custody in Iraq.